Big Picture blogger, economist, CEO, pundit, and all-around capitalist Barry L. Ritholtz gives one of the best definitions of science I’ve seen in awhile on his Big Picture blog. In this post on the hubris of Economics Ritholtz roundly criticizes mainstream economists.
“Hard ‘science’ — Physics, Biology, Chemistry, and all variants thereto — begins humbly. They try to describe the universe around us by creating theories, and then testing them. These theorems are always preliminary. Even when testing validates them, Science is always prepared — even eager — to replace them with newer theories that are proven to be even more valid.
“The humility of science begins with an admission: We know nothing. We seek to learn through experiment and logic, and constantly evolve more and more accurate explanations. Scientific belief evolves gradually over time. Nothing is assumed, presumed, or hypothesized as true. Indeed, research is a presumption that current theories are inadequate or incomplete. The practice of science is a an ongoing search for better explanations, more proof, further verification — for Truth.
“Science is the ultimate ‘show me’ state.
“Economics has a somewhat, shall we call it, less rigorous approach. Indeed, the arrogance of economics is that it is the polar opposite of Science. It begins with a few basic assumptions, many of which are obviously untrue; some are demonstrably false.
“No, Mankind is not a rational, profit maximizing actor. No, markets are not perfectly, or even nearly, efficient. No, prices do not reflect the sum total of all that is known about a given market, sector or stock. Those of you who pretend otherwise are fools who deserve to have your 401ks cut in half. That is called just desserts. The problem is that your foolishness helped cut nearly everyone else’s 401ks in half. That is called criminal incompetence.”
Guest poster George Washington of Washington’s Blog posting at Naked Capitalism agrees, but goes even farther (is it further or farther, I always forget, one is distance and one is time; if only there was some simple way I could resolve questions like this, like perhaps some gigantic database with terabytes of information, and a search function that, using special algorithms, could quickly provide a relatively reliable answer, oh well) in their criticism -
“But I would go further in my criticism of the economic profession by arguing that the decisions to use faulty models was an economic and political choice, because it benefited the economists and those who hired them.”
