Image: Kevin Zhengli
Predicting the future is fraught with difficulty given the immense complexity of human behavior. The general failure of most economists to predict the Global Economic Crisis (GEC) has prompted a barrage of criticism, even Queen Elizabeth II whose personal investment portfolio lost 25 million pounds was moved to grill a group of economists as to why they were taken by surprise.
David Brooks, a commentator who writes for the New York Times and the International Herald Tribune, has written a provocative article that not only gives a brief history of economics in five acts, but also argues that the “dismal science” needs to learn from the historian, the psychologist and the novelist.
Brooks argues that economics at first mimicked science and built models populated by rational and utility-maximizing individuals. This stick figure view of people making economic decisions has, according to Brooks, been replaced by a growing understanding that economic actors are not perfectly rational, that people are not always prodded into action by narrow self-interest and that decision-making is prone to biases.
His thesis is that these new insights came too late and economics not only failed to predict but actually contributed to the GEC which destroyed $50 trillion in global wealth and caused untold human suffering.
Brooks argues that economics is now in a period of deep soul searching. Is economics a science? Should it be a science? Has economics as a discipline made any real progress over the last two centuries? Is economics dead? Should economics abandon model making? Will understanding only come when economics enters the “world of emotion, social relationships, imagination love and virtue”?
For students: After reading the article by Brooks consider the question as to what direction you think Economics should take so that it survives as a legitimate means of understanding human society.
Tags: dismal science, Economics, Global Economic Crisis, macroeconomics, models, TOK
I have a hard time thinking that economics is entirely a science, although no doubt there are aspects which are scientific. When it comes to economics, people are involved. In fact, it’s almost all about people–and as we all know, when people are involved there’s a lot more than numbers and calculations to consider.
There are emotions, there are morals, there are external factors which will sway people’s decisions. I could go on forever, and there is no way to exactly measure how each of these things will have an effect. Therefore I don’t believe it can be called 100% scientific.
Is this an appropriate response? I hope I answered what I was supposed to.
Is economics dead? Most definitely not. If it weren’t for the models economists provide us with, where would we be today? Yes, the GEC caused one too many problems, and it is understandable why economists would be blamed for it. However, there are certain things even economists cannot predict due to the unlikely and unexpected fluctuations our economy possesses. I disagree with Brooks when he states that “decisions are based on biases”, because in a subject as complex and fact based as economics, I would think it would be difficult to incorporate one’s personal bias. I do think economists could possibly make more reliable models if they became familiar with the “world of emotion, social relationships, imagination love and virtue”.
Currently, in this modern world, economics is highly controlled by the choices that people make. If one say, “Economics is all about money” it is not an exaggeration. Thus, we cannot disagree on that statement. However, if we take that idea more deeply, we could notice that human beings are the one controlling the money system by the choices that they make. Whether people sell things at a high cost or low cost, it all depends on one’s choice. Even today, these choices are made by human, which is probably considered scientific. So today on, I think that people should continue making their own choices, including all the calculations in their head and make the economy possible.
Economics and science both has similar aspects where they use data from the past to predict the future. Science does not always go the way you expect and this is the same as economics. Economics depends on choices that individual people make. And in order for a economist to predict the future, I believe that it is important for that person to study the science of psychology.
Yes, I believe that economics is science and that it should be a part of a scientific study. I believe so because in economics, there are many human actions involved with it, which leads into psychology and the way people think and why they think so. In economics, it’s all about making the right decision and the path they take into making the decision. Also, economics should not abandon model making. It is not really necessary to ‘build’ a model, but in your mind, I think it is very important to consider the consequences and benefit before considering the action.
Economics can be science to an extent; it can create a general model that allows economists to predict peoples’ economic decisions. However, its foundations cannot be laid entirely upon the scientific method. This is because people do, in fact, make irrational and illogical choices. As Brook suggests, economics will surely be more successful once it takes into consideration the “world of emotion, social relationships, imagination love and virtue.”
I believe that economics will never really be perfect in predicting these bizarre economic crisis-es. The fact that we are trying to graph and formulate human behaviors into mathematical/scientific figures leaves space for some things that just are logically wrong. We always need to remember the common sense that humans are not robots and we sometimes make “dumb” choices based on our mislead information and beliefs. Unless we ever find a amazing way to formulate and understand all the possible illogical errors humans can make, we always need to be aware that we are dealing with mortal, and sometimes illogical “human beings”.