Economics is Not a Science

And neither is most so-called behavioral economics

Despite being the first American to win the Nobel Memorial Prize in Economic Sciences, Paul Samuelson famously stated, “Economics has never been a science—and it is even less now than a few years ago.” It is my opinion that this statement still holds true today.

Economics has been called the dismal science. Once you get to understand it, you may not find it so dismal, but you don’t find it much of a science either.

I believe that economics will never improve its ability to predict without first understanding and studying behavior as the central source of economic activity. People buy things and spend money. That is behavior. Without behavior there is no economy.

It seems that there are many economic theories that waste intellectual activity. Behavioral Economics is one such theory. With the lack of replication of data from its studies and a lack of understanding science and the science of behavior (behavior analysis), economic professors are just making guesses based on their experiences. Not science!

Behavioral economics does not rely on a scientific understanding of behavior but more often than not uses a cognitive psychological explanation of behavior to explain decision-making—which is not much better in its predictability than economics.

All this said you can imagine my surprise when the Nobel Prize committee awarded Richard Thaler the economic prize for "contributions that have built a bridge between the economic and psychological analyses of individual decision-making. His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioral economics." 

I am constantly frustrated when writers and commentators refer to scientific findings when in fact they are not scientific at all. The hallmark of science is reproducibility. Robert Boyle, a pioneer of the experimental method, maintained that the foundations of knowledge should be constituted by experimentally produced facts, which can be made believable to a scientific community by their reproducibility. By repeating the same experiment over and over again, Boyle argued, the certainty of fact will emerge.

To take this a step further, according to a 2017 study in the Economic Journal[1], more than 89% of researchers have tried and failed to reproduce another scientist's experiments, and more than half have failed to reproduce their own experiments. “

A 2017 study in the Economic Journal suggested that "the majority of the average effects in the empirical economics literature are exaggerated by a factor of at least 2 and at least one-third are exaggerated by a factor of 4 or more". [2]

It seems to me that there is confusion between search and research. We use Google to search but just because our search finds some study that we are looking for does not mean that we have done REsearch. Data mining is search—not research!

Many notable writers and speakers on the business podium tell of searches, but present them as research. I am reminded of the admission of Tom Peters that he made up critical factors in his book, In Search of Excellence, though it was presented as research.

When behavioral economics conducts a study (search), I will admit that it is usually interesting. However, they are typically what one might call one-off searches. Most of them don’t even try to reproduce their results or encourage others to reproduce them.

I have argued that at the master’s level in Behavior Analysis, my field, the study (often called research) should be a replication of someone’s findings in a published study. Maybe only at the doctoral level should we require that the study be original research.

I do not mean to say or imply that there is no valid research in economics but it must be sought out. Most of it is just interesting enough to attract commentators who present these interesting results as fact. But as economists would say, buyers beware.