Economics: Is That All There Is?

Mark Thoma's blog today cites an article by Justin Fox, suggesting that economics has imposed itself and its methods on other social sciences, with an unwonted triumphalism and claim to physics-like precision and certainties begging for skepticism:

...The financial crisis and subsequent economic downturn — which Lazear somewhat infamously downplayed while in office — have put a big dent in the credibility of the macro side of the discipline. The issue isn't that economists have nothing interesting to say about the crisis. It's that they have so many different things to say about it. As MIT financial economist Andrew Lo found after reading 11 accounts of the crisis by academic economists (along with nine by journalists, plus former Treasury Secretary Hank Paulson's personal account), there is massive disagreement not just on why the crisis happened but on what actually happened. "Many of us like to think of financial economics as a science," Lo wrote, "but complex events like the financial crisis suggest that this conceit may be more wishful thinking than reality."

Part of the issue is that Lazear's description of the scientific way in which economics supposedly works (state a theory, test it, revise) doesn't really apply in the case of a once-in-a-lifetime financial crisis. I tend to think it doesn't apply for macroeconomics in general. As economist Paul Samuelson is said to have said, "We have but one sample of history." Meaning that you can never get truly scientific answers out of GDP or unemployment numbers...

What's going on is probably not the incipient overthrow of economics. As described by Lazear, its imperialistic power has in large part been the result of its uniformity of approach over the past half century. (That, and economists have actually been right about some things.) As best I can tell, there is no such methodological consensus in sociology, political science, anthropology, or history at the moment. But the economists' consensus is wobblier than it's been in a while (especially in macro), there is ample motive for insurrection, and the non-economists' stores of intellectual ammunition are growing. Economics may well have reached the stage of imperial overstretch. Interesting times lie ahead.

 http://economistsview.typepad.com/economistsview/
 http://blogs.hbr.org/fox/2013/01/the-end-of-economists-imper.html

The models economists use oft conceal simplistic assumptions within sophisticated mathematics, acquiring a veneer of precision to which they're not entitled.  Some date back to admiration of 19th century statistical thermodynamics.   Many claim economics' primacy not only in describing resources, allocation, transactions and so on, but in politics, even morality and ethics.  'Freakonomics' and its brethren claim economic reasoning as superior across wildly broad areas of human interaction.

Tony Judt, in 'Ill Fares The Land',  decries as 'economism' the notion that economics is not only necessary in human affairs, but sufficient.  He points out that decisions are made, or should be made, on other than economic grounds, that political life and citizens' conduct requires discourse involving more than economics.  Not all can be quantified or modelled.  Not all should be.  Unwarranted attempts to do so are usually out of ideology rather than discussion and compromise, and oft obscure solutions and worsen problems.  And neither do they feel right to those of us who are trying to do the right thing for real people with real problems.