Economics and history have not always got on. Edward Lazear’s advice that all social
scientists adopt economists’ toolkit evoked a certain skepticism, for mainstream
economics repeatedly misses major events, notably stock market crashes, and rhetoric can be mathematical as easily as verbal. Written by winners, biased by implicit assumptions, and innately subjective, history can also be debunked. Fortunately, each is learning to appreciate the other … Each field has infirmities, but also strengths. We propose that their strengths usefully complement each other in untangling the knotty problem of causation.
This complementarity is especially useful to economics, where establishing what causes what is often critical to falsifying a theory. Carl (sic) Popper argues that scientific theory advances by successive falsifications, and makes falsifiability the distinction between science and philosophy. Economics is not hard science, but nonetheless gains hugely from a now nearly universal reliance on empirical econometric tests to invalidate theory. Edward O. Wilson puts it more bluntly: “Everyone’s theory has validity and is interesting. Scientific theories, however, are fundamentally different. They are designed specifically to be blown apart if proved wrong; and if so destined, the sooner the better.” Demonstrably false theories are thus pared away, letting theoreticians focus on as yet unfalsified theories, which include a central paradigm the mainstream of the profession regards as tentatively true. The writ of empiricism is now so broad that younger economists can scarcely imagine a time when rhetorical skill, rather than empirical falsification, decided issues, and the simplest regression was a day’s work with pencil and paper. Continue reading →