Historian and journalist Gideon Rachman argues that “the entire attempt to treat economics as a ‘science … defined by its ability to forecast the future’ is misconceived.” (His quote is from economist Joseph Stiglitz, who is searching for “a new paradigm” to replace the one that failed to forecast the current crisis.)
With the exception of a few deluded Marxists, historians know that their work cannot be used to predict the future. History can suggest lessons and parallels and provide wisdom – but what it cannot do is provide a sociological equivalent of the laws of physics. Yet this seems to be the aspiration of many economists, who notoriously suffer from “physics envy”. ….
[T]oday’s historians are far humbler about what they can hope to achieve than modern economists. Historians know that no big question is ever definitively settled. They know that every big and interesting topic will be revisited, revised and examined from new angles. Each generation will reinterpret the past and deliver its own verdict.
This way of looking at the world is less obviously useful to practical men, seeking to make decisions. But maybe it is time for an alternative to the brash certainties, peddled by those pseudo-scientists, otherwise known as economists.
Gideon Rachman, “Sweep economists off their throne”, Financial Times, 7 September 2010.
My own opinion differs from that of Mr Rachman. I agree that good economics requires knowledge of history, but good history – at least, good economic or financial history – cannot be written without knowledge of economics. History and economics are complements rather than substitutes. Study of economics might prevent historians from making outlandish statements about the causes of a particular war or financial crisis. Study of history might make economists more humble, free them from “P-envy” and allow them to accept graciously the fact that they cannot predict the future.
Economics is a science, but it is a science like evolutionary biology, not a science like physics. Evolutionary biologists cannot predict the future. Nor, for that matter, can meteorologists, at least not with any degree of accuracy. Yet no one argues that evolutionary biology and meteorology are not sciences.
Addendum:
Further to my post this morning, I am reminded of this quote from the famous obituary that Keynes wrote in 1924, on the death of Alfred Marshall:
The study of economics does not seem to require any specialised gifts of an unusually high order. Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy and pure science? Yet good, or even competent, economists are the rarest of birds. An easy subject at which very few excel! The paradox finds its explanation perhaps, in that the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher- in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician.
J.M. Keynes, “Alfred Marshall, 1842-1924″, The Economic Journal, Vol. 34, No. 135. (September 1924), pp. 321-322.
