Suppose the economy does well this year–growth is robust and unemployment falls. What is the reason for the improvement? Will it be because of the natural rebound of an economy after a downturn that has lasted longer than people thought? The impact of the stimulus finally kicking in? The psychological or real impact of extending the Bush tax cuts? The psychological or real impact of the November election results? The steady hand of Obama at the tiller? All of the above? Can any model of the economy pass the test and answer these questions?
The reason macroeconomics is not a science and not even scientific is that the question I pose above is not answerable. If the economy improves, there will be much talk about the reason. Data and evidence will be trotted out in support of the speaker’s viewpoint. But that is not science. We don’t have a way of distinguishing between those different theories or of giving them weights to measure their independent contribution.
I’m with Arnold Kling. This is a time for humility. It should be at the heart of our discipline. The people who yell the loudest and with the most certainty are the least trustworthy. And the reason for that goes back to Hayek. We can’t measure many of the things we would have to measure to have any reasonable amount of certainty about the chains of connection and causation.
That is not to say that economics has nothing to contribute to the debate or to our understanding. It has something to say. It can rule out some explanations, perhaps. It can help us organize our thinking about the scope of different causes. It might help us understand whether some policies are likely to push us toward recovery or further trouble. It can tell us who wins and who loses from various policies. But if our models of the complex organism called an economy are insufficient to predict ex ante the effect of this policy or that, then we cannot expect those models to explain what did in fact happen.
“The curious task of economics is to explain to men how little they really know about what they imagine they can design.” F.A. Hayek.