Tuesday, November 8, 2011

Is Economics a Science?

Usually, no one questions whether Economics is a science.  I want to be the first.  Although there is some give and take among Economists.  Most conventional Economists will concede that Economics is not a pure science, but a Social Science.  A social science is one that is proven through statistical analysis.  This compromise is necessary, because Economics studies human behavior.  Human behavior is different from the behavior of objects, for instance, in Physics.  Humans do not respond consistently or uniformly.  We call this difference "free will," but it is this flexibility that makes it difficult to turn study of human activity into a science.  This difficulty led to the invention of Social Science.  Social science allows facts to be uncovered by finding tendencies.  Social Science does that by creating large groups of humans and stating that in a large group humans act consistently.  There are a number of problem with that assumption.  First, it is not always true.  It can only be true if humans respond within specific limits, i.e., the requirement for rational behavior.  By requiring the subjects of the study to act rationally, Social Science can say such and such is true if everyone in the sample acts rationally.  Of course, there are common circumstances when people do not act rationally: during a panic, during a disaster, during confusing circumstances, during a situation where they feel endangered, etc.

Even after correcting all the defects in a Social Science study or in a pure scientific study there is still a flaw in using these processes to study Economics: they do not work in uncovering the goals of economic process.  Economic study is not about unearthing the bones of a process, but about following and understanding the path of invention.  It is about understanding the rules and axioms that define economic process.  It is about the constraints on the economic design process.  Economics is closer to Architecture than Anthropology.  It is a creative field attempting to improve human existence.  Like an Architect, an Economist is trying to configure the structure of the economy by locating the columns of the money process to support the beams of business and position the floor joists of regulation in the proper position to achieve stability and the strength for the economic edifice to rise higher.

Social Science approaches to Economics only record what has happened in the past.  Social Science studies develop very elegant and sophisticated mathematical formulas, but they simply record the past, they do not predict the future.  It would be like writing a mathematical formula for the Burj Khalifa in Dubai.  Very elegant and sophisticated equations could be written to describe the building in every detail, but does it tell us anything about the building that will exceed it?  No, it only tells us what the starting point of the next design will be.  There is not a clue about what direction the design will go in from this starting point.

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