Monday, April 18, 2011
Economics at its infant stage
I studied economics at university. European, so 3 years of economics-related subjects covering micro, macro, mathematics, statistics, these were the foundation, then: organizational theory, business strategy, corporate finance, marketing, management, accounting, business law. to a lesser degree. Economics is interesting, and the way you can apply many of the tools developed are interesting (See freakonomics), but on the macro side you still have some recurring errors due to human behavior not being incorporated thoroughly, there is still a lot of work to do combining micro and macro studies.
And economics is based on assumptions, and for every guy you have saying one thing, you have a guy saying something else, even the established models used by any professional economist who works in financial ministries and banks etc. can be picked apart if you go to the micro level, which makes discussing with austrians frustrating. This is the essential problem of economics. Microeconomics 'truths' are translated to macroeconomic 'theories', and when the reality of the macroeconomic situation doesn't fit, then economists change their assumptions (rational consumer, total accessibility of information and other lies) in order to make the theory work again, while completely and conveniently ignoring the fact that their theories and axioms no longer bear any relation to reality.
That doesn't mean they should actually be disregarded though, most of the time economics is useful in conducting the stewardship of the state, but if you forget that people are at the heart of everything, as a lot of people, especially the fringes, tend to do, transferring economic policy to social policy and have undesirable side effects.It wouldn't be so bad if economists weren't the most powerful social 'scientists' on the planet, and their meritricious work didn't cause real, genuine human misery and suffering. But without any kind of economic studies you might as well be using astronomy. I think it is silly to disregard an entire branch of studies simply because it cannot predict aggregate human behavior as perfectly as we would like it to. There are plenty of areas other than "macroeconomic policymaking" that are part of "economics". I'm not saying economics will ever be physics, it obviously won't, but if you look at any science, it started out with inaccuracies and esoterics, and then trial, error, testing, hypotheses, etc. scientific method from that point of. Economics takes the sociological or politological claims and theories and attempts to build a rigorous framework to test them in. Of course you can't do repeated experiments with no outside influences etc. when dealing with people, which is what makes it so difficult. At least it is trying.