Wednesday, April 29, 2009

Economics, a most difficult science.

In the Higher Ed supplement of The Australian, the following appears:

"Eminent Harvard University economic historian Jeffrey Williamson says Australian economics has forgotten its history and the Government's financial crisis rescue package may be suffering as a result."

Interestingly, in recent times, I have heard the same opinion expressed by other economists (not all economic historians). I believe they are right. I also believe that because economists can only rely on history it also makes our discipline a most difficult science, perhaps even the most difficult science.

Other sciences, such as chemistry, physics and biology, in general evaluate hypotheses using controlled laboratory experiments isolated from the real world. In contrast, economics does not have this luxury. Therefore we use history as our guide.

A major limitation of history is that it is never an exact match. Therefore, debates ensue as to which past experience is most relevant. For example, in relation to the current crisis, I have heard it suggested that the 1890s crisis is more similar than the 1930s depression.

No comments:

Post a Comment