What’s wrong with economics —1 (Science)

Natural scientists search for patterns and correlations in the data that they compile from systematic experimentation and observation of events. Having measured the data and identified these relationships, they can then make predictions that help human beings understand and control the world they live in. An understanding of mechanics, for example, enables us to build engines, ships, aircraft, bridges and skyscrapers.

Economists seek to do something analogous; to identify and measure economic data (such as wage rates, prices, unemployment rates, investment levels, trade volumes, housing starts, growth figures and much else), and look for correlations in the data that might identify causal relationships between them and so inform economic policy.

But there are important differences between the natural scientist’s task and that of the economist. The observed data that natural scientists use in their computations is observable, objective, and universal. The data can be detected, are matters of fact rather than personal opinion or judgement and apply in all relevant circumstances. But the economic data that the economist needs are often hard to observe and measure, subjective in nature, and greatly dependent on context. And the data may be incomplete, limited, fleeting, dispersed, uncertain and even contradictory.

The economist’s problem is not one of data computation but of data collection. Economics concerns the choices that people make in accessing and using scarce resources such as materials, effort, time, money, and capital. But different people make different choices, depending on their personal, subjective values, which are shaped by their personality, upbringing, culture, aspirations and much else. Their values and the influences upon them cannot be measured; the relevant information is inaccessible, inside the minds of the individuals concerned. 

And tomorrow, that information will be different, because different individuals, in different circumstances and with different values, personalities and priorities will be making different choices about how they work, spend, save and invest and every other choice that the economist hopes to examine.

Eamonn Butler