Hesitations on Economics I

As I become more interested in economics and ponder the trade-offs associated with a career in academic economics and, say, the high-technology industry, one thing that keeps coming to mind is the notion of "falsifiability" in a job. I define it as the ability to see clear and immediate cause-and-effect between the work you do and associated outcomes on the world that are a direct consequence. For example, medicine has falsifiability; people trust doctors because if a doctor is not good at their job, people will die and it will be clear to everyone. Similarly, business owners have falsifiability: there is an easy way to tell if you're doing your job right--see if you're making a profit. A business owner always runs the risk of going out of business. And they own that risk.

This isn't building up to a criticism of the academy. On the contrary: mathematicians and physicists have falsifiability, too. If your proof of a proposition is incorrect, it will be clear to everyone and unambiguous that you have failed at proving the proposition. If your theory of gravitation yields bad predictions for how a projectile or planet will behave, one can simply conduct an experiment and see that your theory is manifestly wrong. It's not just the presence of clear right and wrong or lack of ambiguity, it is also the ownership of risk and coupling of cause and effect in one's job.

One of the reasons I've become entranced with the study of economics is because it's the rare subject that requires a deep understanding of a variety of fields. A successful economist must have a near-professional working understanding of mathematics, statistics, programming, but also history, politics, philosophy. It's the rare field where studying measure theory and reading Hamlet can both be reasonably argued to be relevant to your job. And it's really impressive to see someone go from proving a difficult theorem on a whiteboard to making a moving speech about the future of a society. Finally, I'm convinced it's possible to have an enormous scope of impact when doing your job right. For example, watching Michael Kremer (2019 Nobel) talk about his work on de-worming showcased to me how his experiments in developing countries gave strong evidence that de-worming policies in primary schools can have huge returns in enabling students to be healthy enough to stay in school for the long haul. As a direct consequence of the work of him and his collaborators, hundreds of millions of students are benefiting from a policy that might have made the difference between them getting a high school education, and not. That, is falsifiability.

My problem with economics is that such examples of falsifiability are far and few between. It often feels like economists are commentators on the side-lines of a football match making strong comments about the performance of players, where they themselves would struggle to play against a talented middle-schooler. When an innovation economist makes strong claims about the conditions required for innovation and about the traits a successful innovator should have, it makes one think: if you truly are correct, why don't you act on this knowledge and start a successful research lab yourself? In other words, because the study of societies is so complicated, with so many moving parts, it's easy to conjure up an explanation for why your hypothesis was incorrect, and difficult to really know if you were, unambiguously, right, or wrong.

In Good Economics For Hard Times, the authors point out that medical professionals have very high trust ratings by the public, and economists very low trust ratings. I think this is because of falsifiability. A doctor owns the risk they run from the predictions they make. If they predict a tumor being benign, and it's malignant, someone dies. If an economist predicts a causal mechanism between a certain tax policy and patent rates, they are never held accountable because they can always behind the shroud of "further study is needed", even if policies based on that research might have cost their country decades in patent-years worth of innovation. In some sense, it's as if the "doctors of the economy", who have potentially the most leverage, are held the least accountable and taken the least seriously.

As a direct consequence, surprisingly little economics research makes its way into policy because, as Banerjee and Duflo point out, "economists are not in the business of futurology". This is my problem. If economics isn't meant to make any predictions about the future, what use is it? The entire point of science is to understand underlying mechanisms using the scientific method, and then use that understanding to make falsifiable predictions about the future, and be held accountable for those predictions. Anything else is, as my father puts it, "intellectual masturbation". In short, futurology is the very point of any scientific discipline. It is the raison d'etre, it is the holy grail, it is the single source of truth.

And so if I opt not to pursue economics in the academy, you'll know why. I want to be held accountable for the work I do.