As Sean highlighted, Paul Krugman recently wrote a piece on the state of the economic profession. Krugman was brutal; economic “science” failed to anticipate, much less predict, the current economic crisis. Krugman describes how economists had become infatuated with beautiful theories, and became increasingly removed from the real world. A world in which there are indeed real estate bubbles, financial speculators, and complete and catastrophic financial collapse. The current recession hit, demonstrating the failure of economics as a discipline.
Sean was intrigued by the search for an Economic “Theory of Everything”. He points out that this theory may indeed exist, and when found, will be proclaimed beautiful. Of course, the analogies to String Theory are irresistible. But I will resist. As Sean suggests, General Relativity is a beautiful theory. In fact, it’s stupendously gorgeous. (Unlike quantum mechanics, which although it certainly possesses its charms, is not something I would call ravishing.) General Relativity also happens to be right, so far as we can tell. It is a significant improvement over Newtonian gravity, which itself is no ugly duckling. We’ve come a long way from Ptolemy. Indeed, aesthetics plays a major role in science. The Nobel Laureate himself singles out Sean’s post, and mentions it on his blog. Beauty and truth are not in opposition. But beauty is not a replacement for truth.
As I was reading through Krugman’s essay, however, I confess to a certain amount of envy. His description of the field of economics made it sound awfully familiar. People have different theories. They argue. They write papers. There are influential thinkers. There’s lots of math. It’s just like physics, with one crucial difference:
You’re probably expecting me to say that economics is essentially gobbledygook, while physics is a “pure” science. That may be true, but it’s an argument for another day. What struck me is the fact that what economists do and say really matters, in an immediate and tangible way. They engage in abstruse arguments about the money supply and the subprime market, but at the end of the day, someone somewhere listens to them, and makes a decision about the interest rate, or whether to bailout a troubled bank. Suddenly, millions of people may be out of work. Trillions of dollars may evaporate. A large fraction of the population of the planet may be affected.
Of course, it’s not that physics is irrelevant. It is almost impossible not to look around and see the role of physicists in one’s daily life (starting with the computer in front of you). But if I miss a factor of two, a family in Detroit does not go hungry. Although economics often seems like a “lightweight” discipline, when compared to harder sciences, it has the advantage of immediate relevancy. And at first blush, this seems highly desirable. On second thought, however, maybe I’d rather not have to worry about destroying Iceland while looking for a bug in my code.