Timeless economics

Still makes sense.. and we’ll always have Paris..

Is economic history a part of economics?

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And how do we know? Donald (now Deirdre) McCloskey gave a good answer in 1986.

To summarize McCloskey:

1.       There are those who say that economic history is part of economics.  Some think that economic historians are not quite as good as economic theorists and econometricians, since after all, historians “just tell stories.”   McCloskey nicely disagrees and says it is the other way around: Economics is part of economic history.  And economics is storytelling, not rocket science.

2.       Many if not the overwhelming majority of economists disagree with McCloskey because they believe that economics is more like physics, except that the “atom” in economics is economic man.

3.       The problem with making economics more like physics is not because economists use math, which to many is unintelligible.  There is nothing wrong with math.  It gives rigor to thought.

4.       The problem has to do with prediction and control.  The problem of economics as a social physics, with its theories on the same level as Einstein’s, and its application as social engineering, as when economics is used to prevent or fix recessions, is that economics promises prediction and control that it cannot deliver.

5.       If you cannot deliver prediction and control, you’re not a physicist, or if you consider things economic, you’re not a social physicist.

6.       But inability to predict and control is not a crime.  It just means you can’t make profitable predictions.  And the economist’s quite correct view that there is no profit in the long run is good prediction, but not a profitable one.  It is not profitable because everyone else will act on the economist’s theory to try to make a profit, something that an atom or electron or quark does not or cannot do.

7.       And yet, economists can still have a life, a good one, in the view of McCloskey, as storytellers.  As historians.  Thus, economics is properly part of economic history.

McCloskey holds out some form of consolation.  There are branches of the hard sciences that can only look backward and explain the past, and yet they are quite respectable.  In McCloskey’s words:

.. if economists need a big brother to admire, it should probably not be the physicist. Economists are more like geologists or paleontologists, telling stories of the Pacific plate or the panda’s thumb. There is no prediction, no experiment. There is just mucking about in libraries and computing centers, thinking the stories through and checking to see if they square with historical facts laid up in archives..”

Thus, telling the economic story is as good as it gets.  This leaves a lot of room for telling the story from many angles.  In my mind, this means several schools of economic thought can and will compete, and some questions are never settled, even if we talk all night..

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Written by Orlando Roncesvalles

March 3, 2009 at 7:22 PM

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