Is Economics a Science?

Is Economics a Science?

Pseudo-science or science, which label best describes economics? Or, is economics perhaps a mixture of both pseudo-science and science? In this post, we will attempt to answer whether economics is a science or not.

What is a Science?

In general, a science is any discipline which has four central principles: prediction, explanation, falsifiability, and observation. For the reasons as to why a science requires such principles, I encourage you to read my article: “what is science”. Since that article gives an in-depth conversation about these principles, I see no need to give an exposition of them here.

What is Economics?

Economics can be defined in a number of ways, and each way has different advantages and disadvantages. By no means do I want to debate the semantics of the word “economics,” but I do feel like we need some common starting point. So, here is the textbook definition of economics: “economics is the study of the use of scarce resources to satisfy unlimited human wants”.

Although definitions never paint the canvas entirely, as there are some colours which can be found only outside of definitions, the definition we offered can show us a few essential features on the economic canvas. For starters, economists frequently use the conditions of the environment to justify certain assumptions, like the fact that we have limited resources on earth. Such a fact means a few things for economists; namely, we must make decisions about how to use our scarce resources, we need to choose which decisions utilize resources most effectively, and we need to decide which human desires we should ignore and which human desires we should indulge. In addition to that, the definition also highlights the importance of developing a means to measure human consumption, production, and capital.

Of course, there are many more aspects to economics which this definition neglects, like complex systems research, but it nonetheless provides us a basic picture of economics.

The other important quality of this definition, of which is a necessity for our discussion ahead, is that it separates economics from the stereotypical public perception of a greedy businessman, justly so. Not only are economists researchers of a sort, they are far from being billionaires like many people presume. Economists have a greater interest in the acquisition of knowledge rather than the acquisition of wealth. Those who conflate these two distinct categories of people, I argue, have lost their wit.

So, with the adequate perception of the nature of economics, we shall now move on from definitions and take seriously the question of whether economics is a science or not.

The Types of Economic Disciplines

Now that we understand economics has qualities like decision-making, resources, and human desires as its focus, we can break down further the field of economics. There are subfields inside economics, each of which is either more or less scientific than the other, and that require our attention. To ignore such details, shinning our spotlight of awareness elsewhere, would lead to a worldview infested with the plague of black-and-white thought; a view that ignores the gradients of colour inherent to the reality of the discipline. Each subfield is independent enough to merit unique consideration.

Economics, like psychology, has major divides in the discipline. In psychology, there are researchers that investigate language, perception, and memory, which are all different fields of study. Even furthermore, there are numerous research methods available to psychologists, each of which can aid language, perception, or memory research. For example, psychology researchers can select from fMRI, psychometric testing, or behavioral observation. In comparison to psychology, economists can study consumers, producers, or markets. And they can likewise have a myriad of research methods. For instance, economists can select from observation, mathematical modeling, or indexes. So, just as there are different types of fields and researchers within psychology, there are also different types of fields and researchers within economics.

Of this variety, there are two broad categories which characterize economics, though I am certain that some fields within economics find themselves in a gray area between the two broad categories. The two broad categories we speak of are macro and microeconomics.

Macroeconomics is concerned primarily with broad scope issues; meaning, in the same way that an epidemiologist is concerned with the wide-scale effects of a specific illness, so too are macro-economists concerned primarily with the wide-scale effects of a specific policy or event. Macro-economists rely on quantitative analysis to track trends and patterns inside economies, like whether a certain policy has brought about a shift in demand for an entire market of a certain type of product or not: i.e., marijuana. Comparatively, micro-economists are concerned primarily with decision-making and mathematical models of behavior. For instance, micro-economists spend a great deal of time using the theory of marginal utility to model the behavior of consumers and producers.  The two branches are complementary to each other and also rely heavily on one another.

Now within these two broad categories, we can find fields far more specific in character, like market research analysis; however, we have neither the time nor demand to get into that level of detail. Instead, we will consider the general methods of microeconomics and whether the methods meet the criteria for a science, as well as some examples of how an economist would fail at scientific inquiry.

Microeconomics and Science

The most exemplary model to be found within microeconomics is the market-equilibrium model. The gist of the model is as follows: for every product, there is a demand that fluctuates with price; meaning, more people will buy a candy bar if it is at $2.00 rather than $4.00. So, the quantity demanded is higher when the price is lower, and the quantity demanded is lower when the price is higher: an inverse relationship. This is what economists call the law of demand. Similarly, for every candy bar, there is a supplier who encumbers a cost when producing said candy bars. As a result, the supplier must raise the price of their product to make a profit, so that they may produce more candy bars. From this, we can reach a conclusion: namely, when dealing with a specific product, producers create more if the selling price is higher or less if the selling price is lower. Economists call this the law of supply. Now to return the concept of market equilibrium, economists argue that there is a perfect balance between what someone is willing to pay for a candy bar and what a producer is willing to sell the candy bar for, and that balance is the market equilibrium. This is perhaps the most exemplary model of economic theorizing.

This equilibrium model demands a few comments, as we will now diverge and illuminate two unlit, distinct paths of reasoning in relation to the model; the first being whether the market-equilibrium model its self-adheres to scientific reasoning or not, and the second being whether the further utilization of said model in more complex theories adheres to scientific reasoning or not.

Analysis of Equilibriums

The market equilibrium model depends on the law of demand and law of supply, which means if these laws are of a kind other than scientific laws, we will necessarily reach the conclusion that the market equilibrium model is not scientific by virtue of its constituent theories. Meaning, if both the law of demand and the law of supply fail to adhere to scientific reasoning, then the market equilibrium model cannot be scientific.

Thankfully, however, these two laws do adhere to scientific reasoning. The law of demand has been empirically verified as has the law of supply; which is to say, researchers have tested the theories a massive number of times and reached the same predicted conclusions we discussed earlier. And it takes nothing more than common sense to know this. In general, people are willing to buy more when something costs less, and people are willing to produce more when people pay more. Moreover, we do need a caveat, however. Certain products are resistant to both the law of demand and supply, and so the application of these laws must be done skillfully so. At any rate, both laws rely on prediction, observation, and explanation, and are also falsifiable. They possess the core features of any rigorous science.

Now, it is of vital importance that we make yet another logically nuanced distinction about market equilibriums, given our new understanding of the laws of supply and demand; that distinction being: we are not warranted to conclude, from the analysis of the laws of demand and supply, that market equilibriums are necessarily scientific simply because the two constituent pieces involved in market equilibriums, supply and demand, are scientific. Which is to say, two scientific laws can be used together in non-scientific ways. For example, I could take the law of gravity and the general understanding of the threshold for neural firing and deduce something utterly unscientific: i.e., more gravity equates to less neural firing. This would be logically analogous to the fact that Bananas and Coffee are both wonderful by their own merit but become drastically less wonderful when blended together: two yummies don’t make another yummy in the same way that two scientific laws do not make another scientific law.

So, if the constituent pieces of the equilibrium model do not, by default, make the equilibrium model scientific, then what would?

The First Unlit Path

The philosophy behind the market equilibrium is efficiency; meaning, consumers seek to pay less for a product, and suppliers seek to avoid the over-production of a product. When there is too much of a product, the supplier will have excess supply. As a result, there has been a waste of resources and a loss of capital. Comparatively, when there is a shortage of supply or an excess of demand, the supplier must raise their price, which means consumers pay more. So, the most efficient use of resources is when the market is at equilibrium: when supply is equal to the demand. In such a situation, suppliers do not have to compensate for too much demand by raising prices, nor do suppliers have to worry about lowering their price and losing profit because of excess supply.

This above-mentioned philosophy of efficiency comes with a whole set of predictions, observations, and explanations, and is also subject to being false. And here is where we will see whether the model is scientific or not.

To begin, let us consider the characteristics of the claims which the equilibrium model makes.
The model of equilibriums is indeed arguing that markets are most efficient when in equilibrium, which is something that can be measured. We can set in stone a definition of efficiency and measure how adhesive the markets that are either in or out of equilibrium are to said definition; those markets which are in equilibrium and are close to efficiency reinforce our belief in the model, and those markets which are out of equilibrium and are close to efficiency weaken our beliefs about the model. So, whether the model is correct or false in the argument about efficiency matters less than the fact that it has put forth said argument; only because the put forth argument can be both false and used to make predictions, which qualify it to be scientific.

Even furthermore, along the same line of reason, we can set in stone the definitions about what counts as inefficient, to which the equilibrium model indeed does. And from there, we can repeat the process of measuring how accurate the predictions produced by the model really are. That is, according to the excess supply or excess demand states of the equilibrium model, we should expect to see specific behaviors as a response to the conditions of the market: i.e., excess demand and supply. If those behaviors fail to occur, then the model has failed; however, it would still be scientific since it has made falsifiable predictions.

Hereafter in our reflection, we now know that the many features of the equilibrium model are most certainly scientific, irrespective of whether their arguments are correct or false. So, the model of equilibriums its self is scientific.

However, there is more to be said, for the equilibrium model is seldom used on its own; indeed, economists frequently introduce new features to explain other phenomenon related to equilibrium models.

The Second Unlit Path

When we introduce new features to the model of equilibrium, we necessarily introduce new arguments; meaning, each feature influences how the model behaves and thus influences what the model can be about. To elaborate, price floors and price ceilings alter equilibrium models by either moving the market out of equilibrium or stopping the market from ever reaching equilibrium. Because price floors set a minimum price at which products cannot drop below and price ceilings set a maximum price at which products cannot legally surpass, depending on the actual set price of either, they both will move the equilibrium point of the market.

Now, the new movement within the model, because of new features, as said, introduces new arguments. For instance, if our equilibrium point is $6.00 a product, and at that price we sell 10 products, then introducing a price floor of $7.00 will move us out of equilibrium and place us into a market with excess supply. Reason being, the amount of people who are willing to purchase our product at $7.00 is less than the amount of people willing to purchase our product at $6.00; therefore, the quantity demanded is lower, which means we have an excess of supply in the market by default. So, the new feature of the equilibrium model, namely, the price floor, changes the argument put forth by the model.

The new argument, if we think about it, can be false, has observable criteria, and makes predictions. Firstly, the feature indeed makes predictions about excess supply and the effects of price floors, as well as ceilings. Secondly, we can measure whether the quantity of products sold has lowered or remained the same. And thirdly, if the number of products, for whatever reason, fails to drop, then something is wrong with our argument. Therefore, the equilibrium model is still scientific even with added features.

The Answer

So far, we have gone into the forest of economics and arrived at a fork in the road; we have opted to venture down the path of microeconomics rather than macroeconomics in search for the answer to the question of whether economics is a science or not.

Upon our journey into microeconomics, we lit clearly two paths; one being the equilibrium model and the other being a modified equilibrium model. As we explored, we sought out those features which characterize a scientific enterprise: namely, prediction, observation, and falsifiability.

With the first path, we most certainly found features most associated with a scientific enterprise. Equilibrium models indeed make predictions, of which can be false, and economists can conduct observational studies with the model as well. Those qualities make the equilibrium model scientific.

With the second path, we likewise found particular scientific features within the model; that is, when we introduce price floors and price ceilings into the equilibrium model, we no doubt maintain the qualities of prediction, observation, and falsifiability.

From our discussion of the archetypal microeconomics model of market equilibriums, we can conclude that some economics is a science. Irrespective of how accurate these models are, they possess the components necessary to become scientific; and so, a discussion of accuracy shall not be had as a response to our conclusion.

Yes, economics is a science.


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Ideasinhat is a business development analyst and longtime reader of academic literature. He writes books and essays on science and philosophy, and posts them to this website. The essays, as with the books, cover topics from psychology, philosophy, and cognitive science to economics, politics, and law.

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