Can we use the study of economics to produce conclusive results to predict economic outcomes? We aim to do so, but with so many inconsistent variables and different viewpoints some might argue that economics is far too vague to be classified as a science. Economics was in fact even referred to as a ‘dismal science’ by Thomas Carlyle in the 19th century.
Whether or not economics can be deemed a science has been debated at length over the last decade and this discussion reached its peak in 2013 when three economists received Nobel prizes in economics. The fact that two of these Nobel prize winners had very specific, contradicting views added fuel to the fire as most wondered whether it can be deemed a science if it allows these discrepancies to exist within economic theory?
Is science not the ‘systematic knowledge of the physical or material world gained through observation and experimentation’ within ‘any of the branches of the natural or physical sciences’?
Hopefully we’ll be able to provide you with some understanding as to why economics is known as the polarising science, why some scientists will argue it’s not fitting for the category of a natural or physical science and why most believe it should be classified as a social science.
Is Economics a Science?
The knowledge gained in the physical or material world through experimentation and observation is what makes a study scientific.
This is true when you refer to the study of economics, but the challenge comes in where economics allows economists to freely have their own perspective. These grey areas according to some are a direct contradiction to why the field of science exists where we are trying to accomplish a very specific and true outcome.
Isn’t it true that there can only be one scientific fact?
Natural sciences like chemistry, physics and biology all operate under controlled environments. A scientist will conduct controlled tests to prove a certain hypothesis, theory or question they might have. To do so they need to ensure that all variables can be controlled while the impact of changing a single variable can be tested and monitored.
As an example, let’s say you have a theory that plants need water to grow. If you conduct a specific scientific test around it you will keep two pot plants, a test pot plant and a control pot plant, under the exact same conditions. You’ll only change the variable of water supply in your test pot plant and use the control pot plant to monitor the differences. The result of how the pot plants behave will then either confirm or reject your hypothesis that they needed water. Everything in the environment stayed consistent, except for the water and we can thus conclude that pot plants need water to grow.
When we consider economics we can speculate that certain variable changes would have a direct or indirect change on others, but because economics operates in mutable environments it becomes harder to set a ‘test’ environment stable enough for scientific testing. Economics also includes the aspect of unpredictable human behaviour and the scientific experimentation of deriving definitive theories becomes even more elusive.
Economics is thus believed by most to have inherent bias and therefore there's a strong argument against its classification as a natural science.
Economics can loosely be defined as the ‘science of scarcity’. We test and develop theories on how we as humans, communities and nations behave around the managing and allocation of resources to maximise wealth creation. Due to the quantitative and qualitative nature of the study of economics, most might agree that it still needs to be a science, but due to the aspects of irrational, uncontrollable human behaviour it might be more fitting to be a science around human behaviour.
A Study of Human Behaviour
Economics as a science allows for objectivity. The variables and aspects around economic experimentation and theory depend very much on the person conducting the experiment. Their outcome could vary based on how they form their focus argument for the experiment, the methodology used, how they do their economic analysis or even how they overlay their chosen data over a specific hypothesis.
Human beings also change their minds based on their needs and therefore it could sometimes be impossible to predict economic activity with 100% certainty. The unpredictable nature of human behaviour and how people make decisions based on self-interest is what makes some people lean to the argument of Economics being a human science.
Economic theory is also heavily influenced by the theories economists support, their background, beliefs, ideas and even their political agenda. This is thus a science with strong political overtones and due to that, most economics courses motivate this as a conclusive argument that it remains a social science.
What is a social science? A social science deals with the aspects of society, social behaviour and how we organise ourselves around our social activity. Immediately it sounds as if economics fits much easier into this category than natural sciences even though it focuses on quantitative measures as well. This generally accepted view is what groups economics under social sciences together with law, philosophy and politics.
A Social Science with Mathematics and Econometrics?
The fact that economics makes use of hundreds of mathematical and statistical techniques is what makes people scratch their heads. There are multiple schools and speciality areas in economics where these scientific methodologies make it hard not to classify economics as a science.
Microeconomics is the economic study around the decisions people, communities and businesses make to influence wealth creation. When we start to consider theories around demand and supply, finding markets in equilibrium or the sweet spot where demand meets supply, economists have develop specific scientific methodologies that answers complex economical questions.
There are also specialist fields like financial economics and international trade where economic science use specific data fields and quantifiable aspects to motivate and drive theories. It is thus clear that theories like the well-known laws of supply and demand, are based on rigorous testing and controlled variables, making it a clear science in it's own.
Macroeconomics is usually the specialisation field of economics where most of the debate around the polarity of economics as a science occurs. In Macroeconomics, we look at the economy as a whole in an attempt to try and create theories that would predict economic growth or recessions. Behavioural economics and these human behavioural aspects become less evident, international trade and global events more prominent and thus forming theories under these circumstances becomes more speculative than scientific. Economic theory could not correctly predict the global financial crisis we experienced in 2007-2008 and this continues to be a fundamental fact in their counter-argument against economics being a science.
Economics Puzzles Us...
There are various arguments and viewpoints on whether economics can be viewed as a science or not, but one thing cannot be argued - the fact that it remains an important part of our everyday life. Yes we would classify it as a social science, but the uses of what is traditionally termed as purely scientific mathematical modelling and statistics are also at play and thus some might firmly motivate that it’s more of a science than a human studies subject.
Whether you see it as a science or not, the benefits of economics in forecasting economic activity and trends prove to be invaluable in the following ways:
- It allows us to analyse and measure local and global performance
- It enables the formation and regulation of fiscal policy, decisions on taxation, trade policies, tariffs etc.
- We can identify an economy that’s in an inflationary or deflationary state
- We can try and influence economic growth through tweaking and limiting certain aspects within a nation’s environment
- It allows the analysis of utility maximisation, labour supply and dealing with inequality
If you study a degree in economics, you’ll get a good introduction to economics, learn all about the history of economic thought, economic theory, the enigmatic nature of economic issues and just how complicated it can be to have a very clear viewpoint on what economics is.
Reading economics books, doing research in newspapers, listening to the economic indicators on the radio or speaking to an expert Economics tutor will all contribute to how you would address economic problems through your postulation of economic theory.
Having an Economics teacher who understands your learning objectives and passion will help you take your coursework into a brand new dimension where you will develop informed opinions around business and economics or economic issues way beyond the classical textbook approach.
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