Seeing with reason
A frequent complaint about economics is that the failure of most economists to predict the 2008 financial crisis means that economics isn’t really scientific.
It’s true that most economists didn’t predict the crisis, but the ability to make such specific predictions is not the hallmark of science. Many sciences — such as astronomy and chemistry — do make specific predictions, but not even all physical sciences specialize in such predictions. Biologists, for example, cannot predict what forms of life will be destroyed by natural selection and which will emerge to replace the defunct forms. The course of natural selection depends on far too many unforeseeable details and random events to enable biologists to predict which specific forms of life will perish and which will flourish over time.
Biologists can , though, make “if-then” predictions — such as, “ If the Earth’s average temperature rises by 12 degrees Celsius over 20 million years, then the number of life forms suited to a warmer climate will grow relative to the number suited to a cooler climate.” This prediction is valid and instructive, yet vague. For starters, it avoids taking a stand on whether the Earth’s temperature will rise. Second, it says nothing about the kinds of life that will emerge if the climate warms. Will the new creatures be mostly reptilian? Or will mammals thrive by shedding their body hair, by slowing their metabolisms or by any of dozens of other possible adaptations?
No biologist can answer such questions. Yet no one doubts that modern biology is a true science. Biology supplies a way of thinking that improves our understanding of reality. Biology enables us to understand what we observe around us, and in the fossil record, better than does any alternative explanation, such as biblical literalism.
And so it is with economics. Economics is a systematic way of thinking that improves our understanding, if not our ability to make specific predictions. The economist understands, for example, that raising the minimum wage makes low-skilled workers less profitable for employers to hire. Therefore, concludes the economist, the higher the minimum wage, the fewer and worse are the employment opportunities open to low-skilled workers.
The economist doesn’t predict that hiking the minimum wage will necessarily cause an actual increase in the rate of unemployment of low-skilled workers. Rather, he reasons more modestly by pointing out that hiking the minimum wage worsens the employment prospects of low-skilled workers compared to what those prospects would be without a higher minimum wage. The economist understands that a modern economy is an astonishingly complex, dynamic and huge system in which changes in one part often offset or mask changes in another part.
Consider a physicist standing on a beach and observing feathers floating in thin air. This physicist would not conclude from her observation that feathers are immune to gravity. The physicist understands that gravity works on feathers no less than on steel anvils, but that this effect can be masked by other forces, such as wind. So, too, does the economist, upon observing that a higher minimum wage is not followed by higher measured unemployment, not conclude that a higher minimum wage inflicts no harm on low-skilled workers.
The good economist, in short, sees with his reason that which is often invisible to his eyes.
Donald J. Boudreaux is a professor of economics and Getchell Chair at George Mason University in Fairfax, Va. His column appears twice monthly.