Barry Ritholtz listed the 10 reasons why economics is and art and not a science in his Washington Post Business section column this past Friday (August 9, 2013).
1. Economics is a discipline, not a science.
2. Markets are frequently ahead of, and often out of sync with, the economy.
3. Models are of limited utility. As statistician George Box has noted, “All models are wrong, but some are useful.”
4. Contextualizing data often leads to error. What I mean is that everything economists consider gets forced into their intellectual framework.
5. Narrative drives most of economics.
6. Economists are loathe to admit that “they don’t know.” This trait is common in many professions, but I suspect the modeling issue may be partly to blame.
7. A tendency to confuse correlation with causation.
8. The peril of predictions.
9. Extrapolating current circumstances to infinity: Economists suffer from the recency effect, just like everyone else does.
10. Sturgeon’s Law: Not every economist is a prize winner. There is a wide dispersion of talent in economics, and following Sturgeon’s Law — “90 percent of everything is crap” — many among the rank and file simply are not great analysts.
Ritholtz ends the article by mentioning:
The field of behavioral economics is still relatively young. It has only recently figured out that Homo Economicus — humans as rational and narrowly self-interested actors — is not how people behave in the real world. Economists are just starting to get at these questions of why people make such bad financial decisions, and how we can prevent these behaviors in the future.
Perhaps one day the answer to the question “Why did God invent economists?” will be: “To help us stop making so many bad financial decisions.”
As of late, Economics has been placing more and more importance in what Behavioral Economists (or psychologists) have been finding out - take note of Daniel Kahneman's 2002 Nobel Prize in Economics (although Herbet A. Simon, won his own Econ Nobel in 1978 for his very human-behavior linked research in "decision-making processes within economic organizations").
Ritholtz's point of view echoes what the general academia and intelligentsia (big word - please apply in a post-Cold War context please) communities have been criticizing for decades: that Economics is an inexact science, at best.
An excerpt from J. Michael Bishop's "How to win the Nobel Prize" - on the general attitude toward the Nobel prize in Economics and the view that is generally held about economics as a discipline:
"Nobel himself never accepted economics as a science, and even some of the laureates in economics have expressed doubt about the prize. In protest against the award to the outspoken and controversial Milton Friedman in 1975, a previous economics laureate, Gunnar Myrdal, wrote an open letter to a Swedish newspaper calling for an end to the economics prize. Myrdal's colaureate (and ideological opponent), Friederich Hayek, toasted the king and queen of Sweden with the remark that he would have recommended against establishing the prize in economics had he been asked - in his view, the discipline was not sufficiently rigorous and objective.
One authority on Alfred Nobel and his prizes has suggested that too many of the "Nobelized achievements", in economics "seem perilously close to scientizing the commonsensical.""
"...As for the [Nobel prize in Economics], only its immediate practitioners seem capable of appreciating the merits of its Nobelists. One perennial joke is that mere membership on the faculty of economics at the University of Chicago is sufficient to procure a Nobel Prize. Another is that although the prize for economics was instituted only in 1969, the field of eligible candidates may already have been exhausted.
One administrator of the prize has told the press that "all the might firs have fallen; now there are only bushes left."
In the end, some may charge the many moving parts, changing facets and contributions of economics as a cargo cult science, a concept famously developed by Richard Feynman, a physicist. One such proponent is Deirdre McCloskey.
Irrespective of the fact, if Economists semantically stick to the description of their studies as a social science all this ballyhoo about questioning the validity of economics should lessen, and more importantly, more important work and studies should reveal more and more about social behaviors, which, in a way, are stronger than the physical forces that govern us.
Scientists try and find out about the world, just like Economists.
Both can benefit through interdisciplinary work, since both are unavoidably intertwined, at least when the real world becomes involved.
Like Deirdre McCloskey said in an interview, when asked about how she defines economics (Art or Science?):
"Physics tells us that if a 100 Euro note falls to the floor, it will stay there. Economics tells us that it will be invariably picked up."
Both have something to offer.