Thursday, 9 August 2012

Arguenomists

When I first started learning about economics, my first impression was that given any economic problem, there is no agreement between any two economists regarding it's solution - in fact, that economics can hardly claim to be a solid science at all.
With time and further reading, I overcame my misconception.


The impression that economists can't agree on anything is not new – there are possibly more jokes about economists than any other scientific profession (for a short collection, see here), and even world-famous economists are aware of this fact. The legendary Paul Samuelson – recipient of the 1970 Nobel Prize, whose textbook Economics has been both legendary and dreaded among freshmen for the better part of the 20th century – wrote that economists in recent years have gained the reputation of being a quarrelsome society, who are unable of agreeing on anything.
For the record – he wrote that in 1982, thirty years ago.

Is it a science then?

 

Yes, economics, despite – or rather, due to – all it's academic controversies, is a science. The main reason why the opposite is often believed has been well explained by Samuelson himself, and further elaborated on by countless others, but it still can be explained in one simple word:
Media.
If you ever thought that the 24/7 'insider' coverages of BBC, CNN, Fox, etc. about international economic and political events are the final and unquestionable source of an universal wisdom, then either stop reading, or check out Charlie Brooker's brilliant show Newswipe as soon as possible. Given the public's insatiable appetite for conflict, journalists and broadcasters consequently concentrate on economic issues which are either political (no agreement there), or bring up problems which easily appeal to emotions, f.e. unemployment, trade unions and the appropriate size for governments. In fact, economist's basically agree regarding 95% of the questions ever addressed in an economic discussion.

Disagreements

 

In order to highlight the source of disagreements in contemporary academic discussion, we must mention the difference between positive economics and normative economics – in short, what is and what should be.
Positive economics includes many famous economic concepts, including the classical theory of supply and demand, consumer choice, etc. Ever since the time of Adam Smith and his Wealth of Nations, economists sustained the credibility of these ideas. Positive economics is descriptive, therefore it generates minimal controversy compared to its counterpart.
Normative economics however is explanatory, allowing for multiple implementations of various economic events. Even here, there is a wide sense of agreement regarding a lot of things – nobody longs for mercantilism anymore, for example –, but then comes macroeconomics to make things more difficult.

Macroeconomics

 

Macroeconomics – which addresses the behaviour of multiple economic actors as opposed to the single-actor focus of microeconomics – is the tool that can provide the solution for today's crisis. However, due to political,historical and academical reasons, contemporary economists seemingly fail to provide us with a unified plan.
All is not lost, however – all economists agree that they long for a supportable, dynamic, capitalist economy, and while they brand themselves as Fiscal Conservatives, Neo-Keynesians, Monetarists and the like, they have a well-established and deep understanding of economical theories, and they all adhere the scientific method. Thus, they differ from both fringe scientists and pseudoscientists.

Conclusion

 

Just as Newtonian physics influenced a wide range of the concept of physics, ultimately culminating through relativity theory in string theory and the ToE (competing concepts of particle physics), so are modern micro-and macroeconomics both derived from the principles of classical economics and Adam Smith's The Wealth of Nations.

To paraphrase the well known phrase about punk music:
Economics's not dead.

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