I contributed the following post to the Pseudo-Economics blog today:
The use of the prefix “pseudo” with regards to economics is an interesting, paradoxical one; economics itself has often been accused of being a pseudo-science. What can be salvaged from the naive interpretation, namely a pseudo-pseudo-science?
Answer: that which is most valuable in science.
I like Popper’s idea of falsifiability of claims as a benchmark for what counts as science, so let’s go with that. In this regard, economics has not gotten very far, aside from a handful of results (e.g. net gains from trade) in the last couple of centuries. “Pseudo” looks about right.
There are many fundamental reasons for this dismal performance, but I like to keep causal density, unavailability of experiments and the reflexivity problem as my top three. Once you consider the obstacles, the failures begin to look a little more reasonable*.
Economics is in good company as well; all the humanities – at least when they attempt to understand humans – share these problems. We are outraged to see the natural sciences progress by leaps and bounds while the humanities are left behind. This seems natural to me, however, since the fundamental issues holding economics back have very little to do with computation – the availability of which made the natural sciences explode in the 20th century.
The fundamental challenges that make economics et al. pseudo-sciences are the same ones that we face while trying to make decisions in our daily lives. Even if pseudo-sciences are inefficient at arriving at useful descriptions of reality, they often yield insights into how one goes about learning about the world in the midst of seemingly irreducible complexity. If for only this, we should keep at it.
This then is how I reconcile myself with the idea of pseudo-economics; as long as the endeavor shares the desire to understand reality in an internally consistent way and to falsify this understanding empirically, then its discrepancies with economics or any other field are irrelevant. What matters is disciplined discussion.
*The natural sciences, of course, also face these challenges to a (in my view) lesser degree.