Some Popular Criticisms of Economics and Economists

Economics is a non-subject. It is well known that no two economists ever agree. It is important to distinguish positive economics and normative economics. Positive economics deals with objective or scientific explanations of the working of the economy. Normative economics offers prescriptions or recommendations based on personal value judgments. Even if all economists agreed on a positive economic analysis of how the world works, there would be enormous scope for disagreement on normative recommendations based on differing value judgments. A great deal of the disagreements between economists fall under this heading.

Nor is it surprising that there are important and persistent disagreements in positive economics. Economics can only rarely be an experimental science. It would be prohibitively expensive to induce half of the population to become unemployed merely to find out how the economy then works. Since we cannot typically undertake such experiments, we have to try to disentangle different factors from past data to overcome the problem of other things equal. Using data from a large number of years makes it easier to do this unravelling but introduces a new problem. Since attitudes and institutes are slowly changing, data from many years ago may no longer be relevant to current behaviour. The problems we confront are difficult ones and we simply have to do the best we can.

Models in economics are hopelessly simple. They have nothing to do with reality. A model is a deliberate simplification to help us think more clearly. A good model simplifies a lot but does not distort reality too much. It is successful in capturing the main features of the problem. The test of a good model is not how simple it is, but how much of observed behavior it is capable of explaining.

Sometimes we can get a long way with a very simple model. On other occasions, the behavior we wish to describe is genuinely complex and a simple model may be insufficient.

People are not as mercenary as economists make out. Prices, incomes, and profit are not the mean determinants of behaviour. We can certainly think of decisions where this is a fair comment. Marriage is typically though not exclusively determined buy non-economic considerations. Economists believe that most of the phenomena they study, such as the decision about whether to travel by bus or tube, are determined primarily by economic incentives. This is very different asserting that only economic incentives matter.

Economists recognize that knowledge of politics, sociology, and psychology would necessary to provide a more complete description of human behaviour. These are all factors that economists subsume under the heading “other things equal”. Economics emphasizes the effect of economic incentives. Social attitudes change only slowly and for many purposes may be treated as being held constant. However, if an economist were told, or discovered, that there had been an important change in social attitudes, it would be straightforward to include this in the analysis.

People are human beings. You cannot reduce their actions to scientific laws.

Physicists accept the molecules behave randomly but that it is possible to construct and test theories based on average and systematic behaviour. Economists take the same about people. However, random differences in behaviour tend to cancel out on average. We may be able to describe average behaviour with a lot more certainty.

If behaviour shows no systematic tendencies - tendencies to do the same thing when confronted by the same situation - there is really nothing to discuss. The past will be no guide to the future and every decision is a one-off decision. Not only is this view unconstructive, but it is not usually supported by the data. In the last resort the economic theories that survive are those that are consistently compatible with the data. The more random is human behaviour, the less will be the systematic element about which we can form theories and use to make predictions. Nevertheless, it is better to be able to say something about behaviour than nothing at all.