Monday, March 1, 2010

There is no such thing as free beer

Is the Dismal Science Really a Science? Is There Really Such a Thing as Free Beer?
Russ Roberts writing in the Wall Street Journal:

"The defenders of modern macroeconomics argue that if we just study the economy long enough, we'll soon be able to model it accurately and design better policy. Soon. That reminds me of the permanent sign in the bar: Free Beer Tomorrow.

We should face the evidence that we are no better today at predicting tomorrow than we were yesterday. Eighty years after the Great Depression we still argue about what caused it and why it ended.

If economics is a science, it is more like biology than physics. Biologists try to understand the relationships in a complex system. That's hard enough. But they can't tell you what will happen with any precision to the population of a particular species of frog if rainfall goes up this year in a particular rain forest. They might not even be able to count the number of frogs right now with any exactness.

We have the same problems in economics. The economy is a complex system, our data are imperfect and our models inevitably fail to account for all the interactions.

The bottom line is that we should expect less of economists. Economics is a powerful tool, a lens for organizing one's thinking about the complexity of the world around us. That should be enough. We should be honest about what we know, what we don't know and what we may never know. Admitting that publicly is the first step toward respectability."

Source: Mark Perry, Carpe Diem Blog


  1. It is a shame that beer is not a free good like air and water. Then the world might be a happier place; how pollyannish of me!

  2. I wish we could all just hold hands and get along and share lollipops and unicorns while singing a song of peace and harmony.

    Ideals are so warm and fuzzy.

    Unfortunately we live in a world of natural laws, including human nature, scarcity, and competition to spread DNA and survive.

    Capitalism, limited republican government, the nuclear family, competitive education, and freedom of religion is the only hope of humanity.

  3. Economics is not a strict science? My edition of Human Action begs to differ. Excuse me, Russ Roberts, we DO know what caused the Great Depression. Try asking somebody outside of an Ivy League school.

  4. Edit:

    The reason the economic "scientists" haven't agreed on any set theory is fully explained in the first chapter of Economics In One Lession. Frankly, I'm not at all surprised people resist agreement: