Why does it seem economists can never agree on anything? Tax cuts are in the news right now. The president’s Council of Economic Advisors thinks the new plan will boost GDP by 3 to 5 percent. Other economists say there will be no growth without reducing debt, while others think tax cuts just don’t stimulate the economy that much. How about monetary policy? Some economists favor a gold standard precisely because it would tie the government’s hands in monetary policy, while others oppose it on exactly the same grounds.
When compared with so-called hard sciences such as chemistry, biology, and physics, economics appears to have a pretty dismal record in reaching consensus. We can sequence the human genome and find the Higgs boson, but we can’t even agree on what the impact of a tax cut will be? Is one side of the debate being sloppy or disingenuous? That’s possible, but let’s look at a couple of other potential reasons.
The first reason is media coverage. The health of the economy is likely of more day-to-day significance to the average person than recent cutting-edge developments in microbiology (though I’m not denigrating the overall importance of such fields in the slightest). There might be just as much debate among chemists or physicists at the frontiers of their fields, but we hear about it less often in the media. But economics, at least to this observer, still appears to have less consensus on the basics than these other fields.
The reason I’ll put forward is that economics is harder than the hard sciences — not in terms of methodology or the brainpower of its practitioners, but in its goals. Economics seeks to draw conclusions about systems with immense levels of complexity. Even if an economist knew the needs, wants, and biases of every individual in an economy, market, or even firm, the interaction of that network of moving parts makes it difficult if not impossible to draw hard and fast conclusions. Hard scientists, in contrast, can isolate particles or DNA and do experiments on them in a laboratory.
AIER founder E.C. Harwood was an advocate of applying the scientific method to economics, and importantly emphasized standards and objectivity in the field. But even when economists can do experiments in a laboratory-like setting, their conclusions are necessarily very limited — mostly behavioral results on biases or reactions to certain payoffs. When one exits the lab, even using the most scientific procedures of inquiry, the complexity inherent in economics leaves room for someone to say, “What about this other thing?”
Because it is so difficult to standardize our methods in economics, it is also difficult not to bring in our own worldviews, and our political affiliations and a host of other preferences. Just look at the fields in the hard sciences where there is considerably more public disagreement: climate science, evolutionary biology, and cosmology, to name a few. Each, like economics, features complexity that can’t be studied in a laboratory.
Can anything be done to establish more consensus in economics? First, I think the field needs to take a hard look at the way economists are educated, especially at the graduate level. At my graduate school, our macroeconomics curriculum focused almost exclusively on mathematical models, and typically favored less government intervention in the economy. Had I gone to any of several top-ranked schools on the East Coast, I would have learned a whole different set of models and a philosophy that favored more government intervention. And Austrian or complexity economics (which incidentally have a lot in common)? I barely knew they existed until I started investigating on my own. We need to teach aspiring economists schools of thought other than our own, so that they understand the diversity of viewpoints and methods in the field and can speak each other’s languages.
Second, I’d like to see less top-down policy from the government, in which we observe only one idea at a time, and more leeway given to local governments and private entities. Economists have begun to take a similar approach with field experiments in both the developing world and American schools. But imagine if every municipality, or every school for that matter, got to implement the educational approach they thought was best (and suppose we added some competition into the mix). We would learn much more quickly what worked and what didn’t. People understandably find the idea of experimenting on students distasteful, but I would ask how things are going under the current system.
These approaches will never eliminate debate among even the smartest and most well-intentioned economists, nor should they. But they would, in my opinion, lead to at least incremental progress in the field — though, fittingly, I expect some economists would disagree.