Brian Leiter attacks economics (and me)

by on September 29, 2004 at 4:24 am in Economics | Permalink

A philosopher has levied another attack on economics:

…a lot of the credibility of economics depends precisely on its claim to be a science, in the precise sense of generating successful predictions. (Predictive power may be neither a necessary nor sufficient condition for science, but economists generally view it as what makes their discipline “scientific.”) Indeed, many economists and lawyer/economists have emphasized the putatively “scientific” character of economic theory. Friedman’s classic paper on “The Methodology of Positive Economics” is predicated on the idea that economics is “a positive science [whose] generalizations about economic phenomena. . .can be used to predict the consequences of changes in circumstances.”

All of these scientistic sentiments about economics co-exist, of course, with a very different picture of the discipline as essentially a pseudo-science. It is better, perhaps, than astrology, but not much more predictively successful than common-sense psychology. It parlays a set of implausible and utterly unrealistic assumptions into tidy, mathematically-expressible theories that have little or no connection to reality. A recent article in The New Yorker captures this sentiment well. “[A] good deal of modern economic theory,” says the author, “even the kind that wins Nobel Prizes, simply doesn’t matter much.” (“The Decline of Economics,” Dec. 2, 1996, p. 50)

The attack goes on at length.

The simplest defense of economics (or philosophy, I might add) is biographical rather than methodological. Just spend some time talking to a person who knows little economics (philosophy) and you will be impressed at how much understanding the discipline brings.

Economics in particular does two things. First, it provides “existence theorems” as to what can possibly happen, and how. This may not sound very ambitious, but in fact many of the mechanisms (e.g., time consistency or principal-agent problems) are rich in their implications and applications. Second, economics gives you a good idea of the conditions under which various results can come about.

Milton Friedman overemphasized prediction as a justification for economic science. That being said, plenty of propositions are abandoned because would-be proponents cannot cite convincing evidence on their behalf. How many people today still wish to target monetary aggregates?

I might add that Leiter is the first person ever to attack me for being a Popperian falsificationist. Oddly he mentions my name and then characterizes my views by quoting someone else; by that time he is off and running and never looks back.

An additional mistake of philosophers is to believe that economics rests on the idea of “instrumental rationality,” I have written on this elsewhere.

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