Posts Tagged Physics

Economists Versus Physics

I’m not sure what it is about economics that makes both its adherents and its detractors feel the need to make constant analogies to other sciences, particularly physics, to try to justify their preferred approach. Unfortunately, this problem isn’t just a blogosphere phenomenon; it appears in every area of the field, from blogs to articles to widely read economics textbooks.

For example, not too infrequently I will see a comment on heterodox work along the lines of “Newton’s theories were debunked by Einstein but they are still taught!!!!” Being untrained in physics (past high school) myself, I am grateful to have commenters who know their stuff, and can sweep aside such silly statements. In the case of this particular argument, the fact is that when studying everyday objects, the difference between Newton’s laws, quantum mechanics and general relativity is so demonstrably, empirically tiny that they effectively give the same results.

So even though quantum mechanics teaches us that in order to measure the position of a particle you must change its momentum, and that in order to measure its momentum you must change its position, the size of these ‘changes’ on every day objects is practically immeasurable. Similarly, even though relativity teaches us that the relative speed of objects is ‘constrained’ by the universal constant, the effect on everyday velocities is too small to matter. Economists are simply unable to claim anything close to this level of precision or empirical corroboration, and perhaps they never will be, due the fact that they cannot engage in controlled experiments.

Another, more worrying example, is Greg Mankiw’s widely read Macroeconomics textbook (7th ed, p. 395), when discussing estimates of the NAIRU:

If you ask an astronomer how far a particular star is from our sun, he’ll give you a number, but it won’t be accurate. Man’s ability to measure astronomical distances is still limited. An astronomer might well take better measurements and conclude that a star is really twice or half as far away as he previously thought.

Mankiw’s suggestion astronomers have this little clue what they are doing is misleading. We are talking about people who can calculate the existence of a planet close to a distant star, based on the (relatively) tiny ‘wobble’ of said star. Astronomers have many different methods for calculating stellar distances: parallax, red shift, luminosity; and these methods can be used and cross-checked against one another. As you will see from the parallax link, there are also in-built, estimable errors in their calculations, which can help them straying too far off the mark.

While it is true that at large distances, luminosity can be hard to interpret (a star may be close and dim, or bright and far away) Mankiw is mostly wrong. Astronomers still make many, largely accurate predictions, while economist’s predictions are at best contested and uncertain, or worse, incorrect. The very worst models are unfalsifiable, such as the NAIRU Mankiw is defending, which seems to move around so much that it is meaningless.

Another example is a classic case of economists misunderstanding the use of assumptions. This is from Jehle and Reny’s textbook, Advanced Microeconomics (3rd ed, preface XVI):

In the physical world, there is ‘no such thing’ as a frictionless plane or a perfect vacuum.

Perhaps not, but all these assumptions do is eliminate a known mathematical variable. This is not the same as positing an imaginary substance (utility) just so that mathematics can be used; or assuming that decision makers obey axioms which have been shown to be false time and time again; or basing everything on the impossible fantasy of perfect competition, which the authors go on to do all at once. These assumptions cannot be said to eliminate a variable or collection of variables; neither can it be said that, despite their unrealism, they display a remarkable consistency with the available evidence.

Even if we accept the premise that these assumptions are merely ‘simplifying,’ the fact remains that engineers or physicists would not be sent into the real world without friction in their models, because such models would be useless - in fact, in my own experience, friction is introduced in the first semester. Jehle and Reny do go on to suggest that one should always adopt a critical eye toward their theories, but this is simply not enough for a textbook that calls itself ‘advanced.’ At this level  such blatant unrealism should be a thing of the past, or just never have been used at all.

Economics is a young science, so it is natural that, in search of sure footing, people draw from the well respected, well grounded discipline of physics. However, not only do such analogies typically demonstrate a largely superficial understanding of physics, but since the subjects are different, analogies are often stretched so far that they fail. Analogies to other sciences can be useful to check one’s logic, or as illuminating parables. However, misguided appeals to and applications of other models are not sufficient to justify economist’s own approach, which, like other sciences (!), should stand or fall on its own merits.

, , , ,

37 Comments

Follow

Get every new post delivered to your Inbox.

Join 1,040 other followers