An economist’s physics envy
Published in Insights, The New Zealand Initiative’s newsletter, 31 August 2012
Last week, I attended an annual public policy conference organised by the Australian think tank The Centre for Independent Studies on topics that ranged from foreign affairs to global economics.
However, one of the sessions – traditionally reserved for the latest developments in science and engineering – was most humbling, particularly for the economists attending. If the session was meant to show delegates there is a world beyond policy, it was eminently successful.
An engineer explained how the latest generation of oil rigs off the West Australian coast are constructed and towed to their final destinations, often across thousands of nautical miles. Giant steel constructions are rested on barges and then tipped into the water, with the engineers hoping that the floating devices will keep the contraptions in place – and they do. The pictures we saw were awe-inspiring.
At the other extreme, a nano-biologist told about his research into new ways of detecting cancer through DNA sampling. Early detection of cancer dramatically improves survival rates, so new tests that can read the fingerprint of cancer from a piece of DNA have the potential to save lives. In a few years’ time, we may be able to use handheld devices to take samples and find the result in minutes.
After these impressive scientific and engineering stories, large and small, came the anti-climactic session on the global financial crisis. When engineers build bridges, oil rigs or railways, they seldom engage in ideological disputes. In technology, it is also quite obvious what works and what doesn’t.
On the other hand, there are often serious disagreements in the messy world of global economics, not just on policies but also on the analysis of problems. And even after policies such as ‘quantitative easing’ or ‘fiscal stimulus’ have been applied, economists can still be divided on their success or failure.
Economics became a technical and a mathematical discipline in the 19th century because it tried to mimic the methods of the natural sciences. It desperately wanted to be more precise than the early economists who used only verbal logic.
Ironically, becoming more like the natural sciences in its methods has not made economics more productive. Arguably, the advances in physics, chemistry, biology and engineering have been greater over the past 150 years than the advances in economic science.
If economics wants to be as successful as the natural sciences, it should perhaps rethink using their language and methods. Seeing economics as a discipline that has more to do with history, politics and psychology than with mathematics may be the first step.