economics science

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In order to answer the question of whether economics is a science we must first have some notion of what distinguishes a science from other types of belief systems like theologies, ideologies, and philosophies. A science is a logically connected system of definitional and empirical premises, as described in this chapter. So are theologies, ideologies, and philosophies. The main thing which distinguishes a science from these other ways of analyzing the world is that a science has testable implications, which are tested, and which could be found to be a false description of the world as a result of these tests. In the language of methodology, a science has "falsifiable consequences." Other types of belief systems are explicitly or implicitly constructed in such a way that it is logically impossible for the results of a "test," or of any event in the world, to ever falsify a major tenet of the system.4 Critical or potentially falsifying tests of the major tenets of a science are ideally performed within controlled experimental situations. Other test conditions allow for greater ambiguity in the interpretation of the test results, for it is always possible to plead that uncontrolled circumstances caused the test to come out differently than it would have otherwise. Controlled experimental situations are usually repeatable, so that the effects of unwanted interfering influences can be eliminated or their effects on the outcome of the experiment can be accurately estimated. That is, of course, not true of events which happen in the natural environment and are thus beyond the control of the scientist.

By these standards economics is a science, albeit an imperfect one. Microeconomics, as presented in this text, is a consistent and unified system of definitional and empirical assumptions with testable implications. The tests of economic predictions and, to a lesser extent, the newer extensions of economic theory, are, however, far from ideal. Such tests frequently involve an explanation for empirical "results" derived from some data set which was itself collected by unspecified and unexplained methods.5 While microeconomics often yields quite accurate qualitative (or directional) predictions about the consequences to be expected from particular changes in public policy, quantitative applications of microeconomics are much less successful in determining the magnitudes of predicted changes.

There are many reasons why the products of quantitative economics have remained at a crude level and why empirical economics as a whole has not become more rigorously scientific. The most obvious of these reasons is that it is difficult and expensive, although not impossible, to place economic actors in controlled experimental situations. Without a controlled experiment, however, repeatability of the "same" test is virtually impossible. The test results are thus always subject to varying interpretations, and it is difficult to obtain agreed-upon "experimental constants" for the values of the economic variables being tested. Another problem faced by economic inquiry, which is not so prevalent in the physical sciences, is the influence of "ideological" preconceptions on the results of economic studies. Economics, unlike physics, has rather immediate consequences for the desirability of alternative public policies or for the determination of damages in certain civil court actions, to name but two examples. Although particular economists may be completely free from such bias, the system of rewards for coming to "correct" results tends to encourage "creative" empirical methods. Given the uncertainty about interpretation which exists in any nonexperimental and nonrepeatable "test," it is seldom difficult to discover some interpretation of the facts or data which will yield the desired conclusions.

While these observations should make the consumer of empirical economics cautious about basing his or her actions solely upon one study, they do not provide a good foundation for a more extensive cynicism about the achievements of the discipline. The abundance of empirical economic research currently underway and the growing sophistication of econometric methods largely offset the inherent and environmental difficulties of empirical economics.

While there may still be considerable room for improvement in the empirical application of economics, the accomplishments of theoretical microeconomics are a matter of record. Over the past quarter-century, microeconomic theory, in its various branches, has become universally recognized as the most elegant and extensive engine of social analysis yet devised. The theory presented in this text is the recognized starting point for virtually all microeconomic analysis. It is what is held in common by microeconomists of all ideological orientations or academic specializations. While economics may not yet be the full scientific equal of physics, it is the nearest thing to such a science in the realm of social analysis.