# Why do economists disagree so much?

I'm coming at this from a scientific point of view, having had no formal training in economics - most of what I know about it was from self-studying an undergraduate economics textbook.

My question is, why do economists disagree so much? This doesn't happen in the sciences. For example, for the question "will a driver in a car with these safeguards survive a collision at 100km/h", most scientists will agree on an answer. It might be conditional on various things (e.g. age of the driver), but most scientists will come to the same conclusion.

However in economics, it's different. Faced with a question such as "should we provide more fiscal stimulus for the economy", it's possible that one big group of economists says "yes", and then another big group says "no". To some extent this might be because of personal interpretation of what is desirable. However I would expect that economists should still be able to say something like "if you provide fiscal stimulus, this will happen, and it's up to you to judge whether the consequences are desirable", and yet it seems there's no consensus on what will actually happen. It doesn't help that when I see economics debated in the media, both sides advance what looks like reasonable arguments.

Does economics have predictive power? If so, why can't economists simply tell policymakers what to do? If not, what's the point of economics (it might as well be astrology)?

• Economists don't disagree very much actually.In my experience, the disagreements are often exaggerated. Furthermore, as a politically relevant field, there are bound to be people supporting different sides. Similarly, you might ask as a conservative in the U.S. why do scientists disagree about climate change? Clearly, a sufficient amount of conservative backed researchers are saying climate change isn't man made... Its at least enough to convince a substantial number of voters, which to many gives a sign that there is disagreement, when there isn't. – BB King Dec 18 '17 at 9:22
• We can afford many crash-tests of cars. Crash testing economies is more expensive. – el.pescado Dec 18 '17 at 19:13
• Also, "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!". IOW, it is hard to get the results disagreeing with the political position of people who pay your salary. And top 1% spend more money to support economic think-tanks than the bottom 20% – Peter M. Dec 18 '17 at 19:49
• @el.pescado - re: "crash testing of economics" - (cross look) was that supposed to be a pun? :-) – Bob Jarvis Dec 19 '17 at 1:04
• If not, what's the point of economics (it might as well be astrology)? Congrats! You understood economics perfectly well. ;) – Eric Duminil Dec 19 '17 at 18:43

Some areas of economics have more consensus and predictive power than others. Most economists would agree on the effects of trade barriers, could fairly accurately forecast the effects of a price change given a good demand estimate, would come to the same conclusion about the effects of allowing a merger between two large competing firms, know how asset prices will react to a change in interest rates, etc.

The effect of a fiscal stimulus is one of the most complicated questions in economics because you are asking about the effect of stimulating a system with millions of moving parts (people and firms) and many dimensions (consumption/saving, employment/work, trade, investment, innovation, ...). This is a long way from the simple, closed systems for which natural science is able to give sharp predictions. In fact, when you look at parts of the natural sciences that deal with similar levels of systemic complexity, the overall (lack of) predictive power looks similar to that in economics:

• although principles of ecology are well understood, it is almost impossible to accurately predict what the final effect of, say, introducing a new species into an ecosystem will be
• the theory of evolution is probably one of the greatest scientific theories of all time, but can only be used to make the vaguest predictions about the future
• medics cannot accurately predict the onset of a wide range of diseases—only diagnose them ex post
• models of future global temperature increases have wide error bars
• weather forecasts more than one or two days into the future have wide error bars

The other thing to note is that fiscal stimulus is a highly politicised topic and economists often do a (frustratingly) poor job of keeping politics out of the debate. If you read the economic literature, you will find a story similar to that for your car crash: any outcome is possible but some look more likely, depending on the exact circumstances. Given this ambiguity, politicians of different persuasions have no difficulty finding an economist willing to ignore this nuance and take a politically expedient position (just as conservative politicians can always find scientists willing to play down anthropogenic global warming). But that is less a failing with economics than with economists.

• A good analgoue is fluid dynamics. – Pureferret Dec 18 '17 at 13:24
• @Pureferret Yes, indeed. The behaviour of a smoke particle in idealised conditions in fairly easy to understand. But a billion such particles out in the open air, interacting with wind, convection currents, and other atmospheric conditions appear chaotic and largely random. – Ubiquitous Dec 18 '17 at 13:59
• There is also the point that economics isn't a science, so to compare the level of disagreement with for instance physics, is apples and oranges. Compared to another proto-science (since pseudo-science has a negative connotation) - for instance psychology - economists agree more... – Stian Yttervik Dec 18 '17 at 14:00
• "the theory of evolution is probably one of the greatest scientific theories of all time, but has essentially no predictive power" Only if you're trying to predict exactly what species/mutations will come to be. Otherwise there's a lot of predictive power within biology and being able to predict that if two groups of a species are separated for long enough, they will split into separate species. In the same way economics has no predictive power since it can't tell you whether Bob in Kentucky will buy a new house. – Shufflepants Dec 18 '17 at 16:08
• @Shufflepants But good luck trying to predict what the specific differences will be in those two species. A neolithic geneticist might have been able to predict light skin in Europeans, but could they have predicted the epicanthic fold in East Asians? – Barmar Dec 18 '17 at 23:09

In addition to Ubiquitous' excellent answer, I will also point out the general lack of experimental controls in economics. Your example about crash-testing a car is an easily designed, perfectly reproducible experiment. We can start with laws of motion and knowledge of forces and material strengths to design a car we think will work well, and then actually test the theory. If it doesn't work, we can change the design and try again, until we learn what makes a good design. We can estimate the effect of each individual change, or a combination of changes, by carefully designing the experiment to test the car with/without componenet A, with/without component B, etc.

Economists do not have the luxury of well-controlled or repeatable experiments. We can't test out the economy with both higher taxes and with lower taxes to see which one works. Without a good control, it's very difficult to tease apart interrelated factors. Control experiments allow us to test individual experimental factors to determine their effect, but that's not at all possible in economics. Cause and effect becomes much more difficult to agree upon when one must consider many causes and many effects simultaneously.

The other systems of high complexity mentioned in the other answer all share this feature. They are systems that cannot have all their parameters controlled, so we're just limited to observational studies from which we develop theories. We can examine those theories after the fact, but we usually can't design experiments to test them directly.

• And even in areas where they can perform controlled experiments, like behavioral economics, it can be hard to extrapolate to the real world. – Barmar Dec 18 '17 at 23:11
• I'd like to point out that recently, the possibilities for experiments or at the very least simulated economies, have vastly increased. The existence of massive multiplayer games with living, breathing economies present an excellent opportunity to study large-scale economic processes (such as the hyperinflation experienced in many game-economies or the ruthless corporate warfare in EVE:Online) with relatively easily adjustable parameters (supply and demand can both be controlled by tweaking certain variables) – Valthek Dec 21 '17 at 14:29
• @Valthek Except that in EVE raw materials are infinitely available and fairly ubiquitous, and people who don't care about the game suffer zero lasting consequences for causing massive disruptions. – Shadur Dec 21 '17 at 14:33
• @Shadur While you're not wrong on the resources being infinite, there is a certain scarcity in the production of the resources. You can only mine x amount of resources in a given time and while you could theoretically do that for all eternity, hardly anyone actually will. The limited resource is people's time, not the materials. As for tweaking the supply, increasing the amount of, say, iron that can be mined in a given period effectively increases the supply. As for your 'uncaring people' attitude, there are plenty of people in the real world who would do the same if they could. – Valthek Dec 21 '17 at 14:44
• @Valthek In real life you can only drive your rental speedboat rigged with explosives into the side of an oil tanker once, and people are unlikely to turn it into a popular regular event. (Is "hulkageddon" still a thing, or am I getting old?) – Shadur Dec 21 '17 at 15:04

In my view, the main problem is, that economics is a science about human behavior. Human decision making. Plus, human decision making of large scale. And it is not easy to reliably study and predict that. Too many factors come into play. For example, if you rise price of some good, you can guess that people will buy it less. But if there is a complex problem, like fiscal stimulus or new government tax policy, there are millions of people affected. And each of them has their own priorities, needs and desires. Plus, people do not always react rationally (there is a whole field of economics studying irrationality in human decision making - behavioral economics). So, to have a clear answer to some economic problems, you would need to see into millions of individual minds. That is clearly impossible, so you won't have a definitive answer.

• I think this answer comes closest to really explaining the problem. Any time a science tries to predict a complex system, the best it can do is use some kind of statistical model to arrive at some most likely outcome. This is because by their very nature, complex systems are unknowable on an enumerative basis; rather, their ultimate behavior is an emergent behavior. In economics, there are too many input variables (people) and too few examples to derive a statistical model with any kind of confidence typical of other hard sciences, or engineering (e.g. crash tests as mentioned above). – CXJ Dec 19 '17 at 0:31
• In addition to this, behavior is continuously changing, so previous knowledge can always be challenged. – JoaoBotelho Apr 20 '18 at 4:42

There are already 3 good answers to this question, but I'll try to complement it a bit further with the issues that make Economists disagree.

## What is the purpose of economics? Does it have predictive power?

Economics as a social science is grounded in the positivism paradigm, best described according to Gunter (2000):

The "overryding objective" of the positivism paradigm is to "prove or disprove hypotheses and ultimately to establish universal laws of behaviour through the use of numerically defined and quantifiable measures analogous to those used by the natural sciences"

The point of economics is agreed by most to be finding the universal laws of economic behaviors.

Given that most real-life situations are very complex, there are often competing views and theories on what the outcome will be. This is rooted in a series of issues:

### Logic and Math over empirical proof

Several models, particularly the classics, have been created from mathematical and logical thinking, before the availability of data. These theories and models are logically and mathematically very sound. The issue here is the applicability to solve real-life problems, which becomes a topic for disagreement between economists.

One of the examples is Ricardo's theory of comparative advantage, which is used as a basis for major consensus in the economics profession, and a key driver of the free trade movement, was prepared before the existence of large scale trade data. Nowadays, we have several empirical studies that disprove the applicability of comparative advantage theories for international development: African countries with free trade have not developed near as fast as Asian countries with import tariffs and export subsidies (Piketty 2014, Galbraith 2008) The theory of comparative advantage is so broadly accepted that one could compare it to a "law" in economics, but other sciences would reject any law which is, at least once, proven to be wrong.

Piketty describes this issue very elegantly:

To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves.

This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in.

### Problem of Aggregation

Conclusions taken for one single individual cannot always be translated to aggregate terms (multiple individuals). This means that microeconomic results are not necessarily transferable to macro terms, and this can create disagreement among economists. Preston (1959) makes a good overview of the problem in the first page, or check the wikipedia page.

### Researcher bias

Economics research is highly vulnerable to bias. Even if methodologically the studies can be well grounded in logic and data, the point of view of the researcher can be influenced by one's own ideology or by political influence. A recent study on 159 economic literatures found "half of the research areas have nearly 90% of their results under‐powered" and "nearly 80% of the reported effects in these empirical economics literatures are exaggerated"(Ioannidis, Stanley, Doucouliagos 2017)

Henry Farrell wrote an interesting model on the disagreement between economists based on things such as political influence and level of consensus.

### More like Pharma, less like Physics

Although the predictive power is often expected to be as advanced as Physics, Economics is a relatively recent science compared to most natural sciences. I like to think of it closer to Pharmaceutical studies than physics: there is a lot of experimentation, and we slowly learn what effects certain things have in the system, but we often only realize the secondary effects much later. Pharma is a subsection of Chemistry, and in the same way, I see Economics as a subsection of Sociology.

• I disagree with your claims about comparative advantage. It is not treated as a law in the way you describe - i.e. that free trade is always the best policy. Furthermore, your example of African and Asian countries does not disprove comparative advantage. Lastly, any (advanced) textbook on trade will tell you that tariffs can be beneficial (in theory) for developing countries. – BB King Apr 23 '18 at 9:45
• @BBKing thank you for your comment, i've adapted the text slightly to better represent the comparative advantage issue. The point of that paragraph still remains: several teachings and studies focus excessively on maths without looking for applicability in the real world. Of course not ALL the books and not ALL the economists - this is the source of disagreement. Also, this isn't solely opinion, I added the sources in the text. Perhaps there is yet another point of disagreement: should research focus on improving theoretical models, or on providing solutions for real-world problems. – JoaoBotelho Apr 24 '18 at 2:35

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