Sunday, March 29, 2009

Google Chief Economist Hal Varian on Economics as Hard Science

What Use is Economic Theory? One of my basic questions about economics (and a recurring theme on this blog) is whether or not it should be considered a hard science. As it turns out, Hal Varian wrote a (short, accessible) paper addressing this question 20 years ago. He sums up his position in a comment to a post on Mark Thoma's blog:

My thesis is that economics should not be compared to physics but to engineering. Or, alternatively, not to biology but to medicine. That is, economics is inherently a "policy science" where the value of an economic theory should be judged according to its contribution to economic policy.


The whole paper is worth a read, especially knowing that Dr. Varian wound up at Google.

2 comments:

Rod said...

Varian has practiced economics as though it is physics. This micro text books assume "laws" that govern behavior and attempt to calculate out comes assuming the world solves all problems in a single iteration.

A "hard" science has theories that can be tested. Economics as practiced now doesn't have the testing down.

It could and should. The change would require a switch to a different "new kind of science". Check this book out and you will see what I mean:

A new Kind of Science"

Charlie said...

Rod-

Interesting. Can you explain more how Wolfram's book could apply to economics? I've read it, and while I understand that interesting, unexpected patterns can emerge from recursively applying simple transformations to data, I'm not sure how that translates. Could you give me an example?

Thanks,
Charlie