Epistemology, Scientific Method and Formal Theory, Economics


Why is Economics considered not to apply the scientific method in its pure form, nor develop scientific theories and how so?

Trade and Government policies(For political economics/positive political economy) provide the observations. There is experimentation where agents are asked to decide in a closely regulated environment. E.g a computer laboratory. From phenomena inductively we develop an axiomatic system. How should the hypothetical agents in the mode/thought experiment act. Their preferences, their incentives, their ultimate goal etc. Economic theories follow deductively from the axioms inductively inferred.

One observes that wherever competition increases prices drop. We develop profit maximisation and just come up with any well behaved Supply and Demand functions( we inductively infer what it means for functions to be well behaved by seeing what most agents and most firms do). Then using basic mathematics we play a little with the functions and the result is that we explained why and how prices drop when competition increases. We help the Competition Agency measure competition and develop ways to combat monopolies and cartels.

By observing what most firms and agents do we come up with the Law of Prices. Which is a mere observation.

One might say that we are just confirming the observation and Economics is useless but I fail to understand the critisism.

Economics is phenomenological( there is no Economics without the observations) and they aim to help developing Laws, Policies etc.

I am not directly asking whether Economics is a science. I am not looking for any sufficient and necessary methodological conditions. I am not trying to solve the demarcation problem in itself. I am trying to understand the critisism and question/oppose its validity whatever the solution to the demarcation problem is considering that whatever the solution is must necessarily include all branches of physics as a science.

George Ntoulos

Posted 2020-03-23T01:06:50.763

Reputation: 262

Economic behaviour is in many respects dependent on social interactions with all of the contingencies and lack of reproducibility that entails, so that much of economics is not amenable to the scientific method. – Nick – 2020-03-23T01:27:18.273

@Nick Quantum mechanics and Statistical Mechanics are as vulnerable and suspectible to contigencies as Economics with Relativistic Physics and Astrophysics are vulnerable and suspectible to the lack of reproducibility we cannot attain relativistic speed and much less the speed of light( It follows from Lorentz Transform). One just needs to study Photons instead of Stars and we get both contigencies( due to the quantum scale) and lack of reproducibility(due the inability to reach relativistic speeds). – George Ntoulos – 2020-03-23T01:39:42.510

I'm afraid that what I know about physics could be written on the back of a postage stamp, so I cannot offer a well-informed reply. Fair comment, nonetheless. – Nick – 2020-03-23T02:40:34.463

There is no 'pure' form of science. See the demarcation problem of science and my response to 'Is economics a science?'.

– J D – 2020-03-24T17:31:08.137

Does this answer your question? Is economics a science?

– J D – 2020-03-24T17:32:11.720

@JD I am not directly asking whether Economics is a science. I am not looking for any sufficient and necessary methodological conditions. I am not trying to solve the demarcation problem in itself. I am trying to understand the critisism and question/oppose its validity whatever the solution to the demarcation problem is considering that whatever the solution is must necessarily include all branches of physics as a science. – George Ntoulos – 2020-03-24T21:52:01.127

@GeorgeNtoulos And still you seek a binary answer where a graded one is necessary. By definition, all branches of physics are scientific activities. The only question is to what degree do they meet hard and soft definitions. Sometimes things do no fit neatly into buckets. – J D – 2020-03-25T19:39:48.267

@JD I am fine with a graded answer. The softest branch of physics should meet the definition to the same degree that the hardest branch does( Physics is the prototype of Science). The definition of hard science should be one to have even the softest branch of physics meet it 100%. And then given that how much of that definition do economics meet? Why? How is the critisism of economics then being unscientific valid? I just though that giving a cardinal answer would be hard or even impossible. – George Ntoulos – 2020-03-25T20:23:14.463



Economics is currently and usually defined as the social science studying the production, distribution, and consumption of wealth and of goods and services. It is a social science that uses mathematics and mathematical models, but its mathematical hypotheses and models are often not testable or verified experimentally. So it does not follow rigorously the rules or principles of the scientific method.

As a social science, economics is independent of the political acts of any government or other decision-making organization; however, many policymakers or individuals holding high positions that can influence other people's lives are known for arbitrarily using a plethora of economic concepts and rhetoric as vehicles to legitimize agendas and value systems.

Economics has been criticized for relying on unrealistic, unverifiable, or simplified assumptions, in some cases because these assumptions simplify the proofs of desired conclusions.

Mainstream economists such as Keynes and Joskow have observed that much of economics is conceptual rather than quantitative, and difficult to model and formalize quantitatively.

Economic theories are frequently tested empirically, largely through the use of econometrics using economic data. The controlled experiments common to the physical sciences are difficult and uncommon in economics, and instead broad data is observationally studied; this type of testing is typically regarded as less rigorous than controlled experimentation, and the conclusions typically more tentative. There is a field of study called experimental economics, but its methods have been somewhat criticized.

The historian and philosopher of economics Philip Mirowski observed that:

The imperatives of the orthodox research programme [of economic science] leave little room for maneuver and less room for originality. ... These mandates ... Appropriate as many mathematical techniques and metaphorical expressions from contemporary respectable science, primarily physics as possible. ... Preserve to the maximum extent possible the attendant nineteenth-century overtones of "natural order" ... Deny strenuously that neoclassical theory slavishly imitates physics. ... Above all, prevent all rival research programmes from encroaching ... by ridiculing all external attempts to appropriate twentieth century physics models. ... All theorizing is [in this way] held hostage to nineteenth-century concepts of energy.

Here are also ten plausible or possible reasons as to why economics is more an art than a science:

1 Economics is a discipline, not a science. Physics can send a satellite to orbit Jupiter, tell you exactly when it will arrive and the altitude it will orbit at. Economics can barely describe what happened yesterday — and without any particular precision.

2 Markets are frequently ahead of, and often out of sync with, the economy.[...]

3 Models are of limited utility. As statistician George Box has noted, “All models are wrong, but some are useful.” That was the professor’s way of explaining that models are imperfect depictions of reality. It’s best not to become overly reliant on them.[...]

4 Contextualizing data often leads to error. What I mean is that everything economists consider gets forced into their intellectual framework. The imperfect lens of economic theory is less than an ideal way to view the world.[...]

5 Narrative drives most of economics. Everything seems to be part of a story, and how that story is told often leads to critical error. Think about phrases like “stall speed,” “second half rebound,” “muddle through,” “Minsky moment,” “austerity,” “escape velocity,” etc. All of these lead to rich tales often filled with emotional resonance — but not a lot of insight.

6 Economists are loathe to admit that “they don’t know.” This trait is common in many professions, but I suspect the modeling issue may be partly to blame. Whenever I see a forecast written out to two decimal places, I cannot help but wonder if there is a misunderstanding of the limitations of the data, and an illusion of precision.[...]

7 A tendency to confuse correlation with causation. This is one of the oldest statistical foibles, and yet economics remains rife with it at the highest levels.[...]

8 The peril of predictions. Another brain teaser: Why are Wall Street economists so married to making forecasts? They are mostly miserable at them [...]

9 Extrapolating current circumstances to infinity: Economists suffer from the recency effect, just like everyone else does. Their experiences with typical recession cycles in the postwar era left many of them blind to the fact that something unusual was occurring. This left them unable to understand how and why the post credit-crisis era was so different from their prior experiences.[...]

10 Sturgeon’s Law: Not every economist is a prize winner. There is a wide dispersion of talent in economics, and following Sturgeon’s Law — “90 percent of everything is crap” — many among the rank and file simply are not great analysts.

And on a side note: I am not trying to draw a distinction between different groups of economists, say, between the macro and micro or among various schools (Monetarists, Keynesians, Austrians). I don’t find it compelling. In 2009, Nobel laureate Paul Krugman asked “How Did Economists Get It So Wrong?” He wondered how “the profession’s blindness to the very possibility of catastrophic failures in a market economy” could ever have occurred.

E. Noujeim

Posted 2020-03-23T01:06:50.763

Reputation: 26

With the exception of the first[ Economics....scientific method] and the fifth[Economic....somewhat critisized] paragraphs the rest of your answer has been tangent to the question. Why does it matter epistemologically how the poticians use economics? What is the role of quantification in the scientific method( Is there some reference)? I am asking about the method please stick to the method. The people and the results(utility of the models) are irrelevant to whether Economics purely apply the scientific method. Please do not reference journalists and pop culture. – George Ntoulos – 2020-03-23T17:36:18.933

Astrophysics has complete experimental non-reproducibility everything large-scale or needed relativistic speeds has a complete experimental non-reproducibility. As far as predictivity goes you just need to look at the Subatomic World. Quantum Mechanics, Statistical Physics, Photonics. Klein Nishina's scattering probability distribution is an example of how much probabilistic prediction physics makes. Is the scientificity of physics restricted to classical physics? – George Ntoulos – 2020-03-23T17:42:13.273

@ George Ntoulos Physics is rightly regarded as an exact science. Astrophysics is a branch of astronomy and is directly related to physics. There are observational and theoretical aspects of astrophysics, but both physics and astrophysics follow closely the rules of the scientific method. I tried to give formal as well as informal explanations involving someone who knows about investments and economics. In any case you seem to be very attached to your own opinion and views. – E. Noujeim – 2020-03-23T18:22:12.197

Astrophysics is not a branch of astronomy. My physics teacher(Marcio Santos) is a University Professor teaching Astrophysics and is himself an Astrophycisist. Astronomy is more related to mathematics and has the observation and measurement parts. Astrophysics have the inference and prediction parts. Astrophysics is a branch of Physics while Astronomy is a branch of Mathematics. Physics does not lose its scientificity when dealing with Stars, Photons, Tachyons, Neutrinos, Subatomic World. So Predictivity and Reproducibility seem not to be necessary. – George Ntoulos – 2020-03-23T18:37:57.277

Otherwise we would be rejecting the scientificity of Quantum Mechanics, Relativity( Special and General), Astrophysics, Photonics and at large everything but Classical Mechanics. – George Ntoulos – 2020-03-23T18:39:20.423

Astrophysics can be called a branch of physics or astronomy or of both. Theories of physics contain approximations or probabilities, but these approximations try to explain natural phenomena as accurately as possible, and are accepted when they are tested or experimentally verified. If physics is "lost in math" and uses mathematics without experimental testing, it loses its accuracy in relation to the real physical world and becomes mostly scientific speculation. – E. Noujeim – 2020-03-23T18:42:43.780

1Economics and its theories currently use mathematics but with little experimental verification. – E. Noujeim – 2020-03-23T18:46:46.677

How exactly do you suggest we experimentally test with stars and planets? We are not able(technologically) to reach relativistic speeds so we can't run an relativistic experiments either. Approximations and accuracy are conflicting. When one wants to be as accurate as possible they will almost always claim they do not know. They will absolutely never risk an approximation. As such Physics has quit Accuracy and aims for Usefulness. – George Ntoulos – 2020-03-23T18:55:19.297

@GeorgeNtoulos Relativism has been proven empirically with particles including photons. One needn't have a spaceship to find objects in the universe that move near or at the speed of light. Your concept of science is severly impaired until you become knowledgable about the demarcation problem of science. No contemporary philosopher of science accepts that science is a monolithic method.

– J D – 2020-03-24T17:55:53.783


If you google 'Is economics a science', the vastly predominant response mirrors my response on stack exchange.

– J D – 2020-03-24T17:58:02.210

2@GeorgeNtoulos Our particle colliders work at up to 99.9999991 per cent of the speed of light. If that's not relativistic speed I don't know what is. Atomic clocks have shown to run differently between sea level and mountain height (because one moves relatively faster). You seem to base your comments on ignorance in the field. It also seems you are not interested in a proper answer, but rather like to discuss things from a preformed standpoint. This is the wrong place for this kind of approach. – Philip Klöcking – 2020-03-24T21:11:31.400