Wikipaedia defines Science (from Latin scientia, meaning "knowledge") as a systematic enterprise that builds and organizes knowledge in the form of testable explanations and predictions about the universe.[1] In an older and closely related meaning (found, for example, in Aristotle), "science" refers to the body of reliable knowledge itself, of the type that can be logically and rationally explained.
A small diversion to thank Wikipaedia for the amazing utility it provides in efficiently pulling up definitions. Those who went to school before the internet era can perhaps recall the torpid process of searching for meaning in overwhelming dictionaries. Children of the information age definitely have it better, which raises a fundamental question. With tons of information available literally on finger tips, why does Economics bollix up every time?
In accordance with the definition reproduced above, the key attribute of a science is providing testable explanations and predictions. Further it should be reliable, logical and rational. Laymen should by now be snickering politely or even guffawing loudly on revisiting the title of this article. To parody a famous quote, "Economics is too serious a business to be left to Economists".
"In economics, hope and faith coexist with great scientific pretension and also a deep desire for respectability," John Kenneth Galbraith. Perhaps the Victorian historian and political philosopher, Thomas Carlyle was not far wrong when he referred to economics as a dismal science. While Carlyle's insight was in response to Thomas Robert Malthus's prediction that population growth in future will exceed the food supply resulting in starvation, a body of knowledge which derives strength from hope and faith, if Galbraith is right, may not qualify for pure science.
To be honest, Economics does place significant reliance on hope and prayers, since only divine intervention can ensure that all else remains constant, which assumption is the backbone of most economic theories. While not in any way intending to belittle Adam Smith's remarkable achievement, au contraire "The Wealth of Nations" is sheer genius, but even moral philosopher and the father of economics espoused that the invisible hand was responsible for everything. Additionally, only an economist can solve the simultaneous equation for the duality. If technological gains can continuously reduce cost, thereby increasing returns and competition will always result in diminishing profits, will there be economic growth?
Curiously, economic theories in general reading appear extremely logical, which gives further impetus to the enigma attached to their practical application. For instance, David Ricardo's comparative advantage whereby individuals and nations should only focus on producing goods where they are most efficient makes a lot of sense. Problem is why, even after almost 200 years, has the world not latched on to this idea and why does the only superpower continue to subsidize its agriculture sector rather than pursuing trade? Please note that free world trade is the natural outcome of comparative advantage and the resistance to the former is indicative that all else is not constant during the application of the latter.
Consider Alfred Marshall's supply-and-demand curve which graphically indentifies the equilibrium between price and quantity based on supply and demand. Brilliant insight complicated by "all else" including irrational decisions, advertising and technological advances, to quote a few. The question is whether an economist can in this information age develop a model for the optimum unit price of any item?
Irrespective of all of the above, the general tendency of the uninformed would be to follow expert advice, problem is which advice? For a long time the world followed the advice of the father of modern macroeconomics, until things went south! John Maynard Keynes advocated for government intervention, albeit in certain situations such as deepening recession and looming depression, which theory runs contrary to the free markets theory. Even under the free markets theory, if the invisible hand cannot be expected to be honest and unselfish, what exactly is the right amount of government regulation remains an unsolved riddle.
Perhaps the greatest illusion in economics is paper money, although one is unsure whether any economist can be credited with the biggest invention since the wheel. However, where credit is due is that economists redefined money with no intrinsic or inherent value, and then they went a lot further. Monetarism believes that controlling the amount of money in the economy can do magic. The logic that printed paper or even worse not even that as in the case of banking accounts, can control inflation, supply and demand and do a lot more is mind-boggling, especially when in most cases the exact rate of inflation in a country itself is a mystery.
Perhaps this discourse appears harsh, after all the science of economics might just be evolutionary. Notwithstanding differential views on evolution, at least other sciences get some of the things right; they improved health, improved quality of life and gave a better understanding of the world around us, what has economics achieved?
Free markets gave sub-prime, monetarism created the euro-debt and the invisible hand, Libor. Fiscal and monetary intervention facilitated government largesse while laissez-faire subjected the populace to private sector greed. Planned economies resulted in nationalisation and capitalism brought around privatisation and the best outcome remains debatable. At this point, everyone can appreciate Mr Harry S. Truman's frustration when he uttered these eternal words, "Give me a one handed economist! All my Economists say, on the one hand..... on the other".
Today, one wonders whether anyone can predict the economic future of the globe or even that of a nation. As far as economic predictions go, very few might have passed the test of time. It would be useful if economists could come up with a singular workable model for nations to adopt which did not assume all else being constant. Anyone who did would definitely beat the guy who invents the perfect mouse trap to the bank.
In essence it is not important whether Economics is a science or not. Maybe Economics is a branch of history which the world can never learn from or perhaps it is an art discipline to be admired from afar. Nonetheless; what is important is that the world needs economic solutions more today than ever before, for all one knows; Malthus might have been right except that mass starvation occurs when the world population reaches 9 billion.
Critically the developing nations of the world and the poor on this globe need salvation, and the only hope remains to be economics. Maybe the solution is a golden mean between capitalism and free markets or a golden balance between monetary and fiscal policies, or it is, has been and will forever be all about profits. "Economics is extremely useful as a form of employment for economists," John Kenneth Galbraith.