Economics

All humans (and I mean everybody - positive scientists, social scientists, artists, white and blue collar workers, and of course non-human organisms too but I won't be expanding on that here) observe and estimate. In order to understand the world (and, in some cases, to use this knowledge for specific ends) they feed information obtained by observation through estimators of various kinds.

Economics is nothing more than logical reasoning on steroids. Similarly, econometrics - a fundamental part of economics - is nothing more than the efficient processing of 'objectively coded' information on an industrial scale. For a piece of scholarly work or for a thought process to be categorised as 'economics', the estimator utilised has to have a relatively high 'objectively coded' component, as well as possess a degree of testability regarding the accuracy of its predictions. Of course, in economics you never get a 100% 'objectively coded' system: at the very least, you have to assume some mapping of reality to a mathematical model, and usually much more. It is still the case, however, that at the heart of any economic estimator lies an explicitly set out system.

Economics is a method, or if you prefer a tradition, not a topic; and if you confuse it for a topic it is because the method is more relevant to some areas than others. What does the method consist of, and how is it different to positive science and what other social scientists do?

'Sociologists, psychologists, historians, and anthropologists' and also journalists, astrologists and agony aunts are different to economists to the extent they utilise 'objectively measured' variables to test their theories of how the world works and the causal mechanisms behind what we observe. Anthropologists (and artists seeking to maximize the 'aesthetic beauty' or popularity of their produce) hardly use any at all. Sociologists tend to settle for less than economists do, while physicists rely almost exclusively on 'objectively measured' variables.

That is not to say that the work and advice of anthropologists, historians or newspaper political editors cannot be useful: in many cases these guys generate good descriptions of reality and good predictions. In contrast to physicists however, and to some extent economists, their estimates are produced by an implicit, hard to describe and replicate, process; they rely on non-objectively coded information and are less suited to testing and verifying.

Churchill saw the threat from Hitler without running any regressions, without consulting any hard-coded data and without clearly laying out the constituent parts of his model. Similarly, if I throw a ball towards you, you will catch it without taking the time to record the ball's speed, the atmospheric density and other variables of interest and applying equations of motion. The problem with both these cases is that there was no way for Churchill to convincingly prove his case, and there's no way you can build a mechanical system that will be able to catch the ball without being more explicit about the way the system works.

For understanding the way society works, economics offers precisely this 'explicitization' of the estimators and it allows us to test the validity of different predictions. In many cases, it will still be preferable to go with implicit estimators: you may trust Henry Kissinger's advice on foreign policy more than the advice from an economic model utilising data on political attributes, simply because the 'subjective' portion of the latter estimator is enough to render it worse to Kissinger's fully subjective offering.

Overall, however, the greater availability of 'objectively coded', 'explicitly measurable' information, coupled with better and 'cheaper' well-defined estimator components can only mean that economics will become more, not less, important in the future. Expect news coverage of the Democratic primaries to take prediction markets more seriously and political pundits less so; expect military strategists to have economics degrees, and expect astrologists to be taken somewhat less seriously.

Economics has a bright future ahead.

Postscript: This is Exhibit B on the case for the continuing health of economics. Thanks to Ken Houghton at Marginal Utility for shaming me into posting this. Note to self: try to kick the habit of defining 'tomorrow' loosely.