Economics Might Be Literature, but It’s Not a Science

In my previous post, I praised the award of the Nobel Prize in economics to Elinor Ostrom, the first woman to win that prize, for her work recognizing the value of community ownership and governance, with practical applications in many different settings. Surely this represents a proud moment for the economics profession. Oh, wait — Ostrom isn’t an economist, but a political scientist. And therein lies a tale about the Nobel Prize in economics (actually “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.”) The original Nobel Prizes are given in physics, chemistry, physiology or medicine, literature, and peace. In 1969, the Swedes instituted this separate economics prize, but it isn’t part of the original Nobel awards. 

And as Ostrom’s work and the history of the prize show, economics is not a science like physics, chemistry, or medicine.  (Whether it is more like literature can be debated elsewhere, as so much of economics is badly written.) It is a social theory, based on strong premises about how human beings act, but its findings cannot be replicated in a strict scientific way, because too many other factors intervene in the real world, and the few laboratory experiments that are done in economics are too isolated from reality to be generalized to real-world conditions.

Human organization, power relations, historical circumstances and many other factors interact and affect economic outcomes. Consider that Edward Prescott, a hyperconservative macroeconomist who dislikes virtually all government intervention in the economy won the Economics Prize in 2004, while Paul Krugman, a hard-core Keynesian macroeconomic interventionist, won in 2008.  This would be like awarding the prize to two physicists who disagreed about whether there is a law of gravity, or two biologists who argue about whether evolution is real.

So hooray for Elinor Ostrom and her pathbreaking work. Hooray that finally a woman has won this prize. Now retire it, and help free the world from the notion that economists are like physicists.  Instead, we should strive to meet the standard Keynes set for us in 1931 in Essays in Persuasion, Chapter 5: “If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.”