Not an exact science but getting there Sir, P.A. Stahl (Letters, April 26) argues that economic theory fails to generate quality predictions, such as the recent financial crisis, yet allows it to be �a rudimentary forerunner to a real science�. However, his description of economics as a pseudo-science follows exactly Thomas Kuhn�s structure of scientific revolutions. Kuhn argues that scientific theory does not evolve in a straightforward manner, but from successive phases of paradigm shifts.
Mr Stahl suggests that economics is not to be compared with a real science such as atomic physics. Yet, to disqualify economic theory because it failed in the crisis is to suggest that physics has failed as a science because it does not have a unified theory for quantum mechanics and the general theory of relativity. It was more than 200 years before Einstein improved Newton�s laws of gravity and now, a century later, there still is no consensus on the role of gravity in quantum mechanics.
Recent qualifications on the theories of efficient markets and rational investor behaviour imply that economics as a science is at least in the pre-scientific phase of Kuhn. I have to agree that the current phase suggests that economics is not an exact science. However, if one allows for the development of economic theory, Kuhn would agree that advancement is expected.
A serious empiricist would see the recent discussion as nothing more than the development of normal science.
Dr. Sanjay Bissessur Assistant Professor, University of Amsterdam Business School, Amsterdam, The Netherlands
The issue I have is with the opening line: "economic theory fails to generate quality predictions, such as the recent financial crisis, yet allows it to be �a rudimentary forerunner to a real science"
The problem here is that we think that if only we can improve our models enough, that we will finally "get a handle" on how markets work and we can successfully steer them. Keynes and all that.
The marketplace is simply too complex to model -- any attempt by us to do so will always result in abject failure and the problem is that failure has an adverse financial effect on all of us.
When the markets are set free -- left to their own devices; you see some surceases, some failures but you also see an overall rapid rise in growth and healthy business activity.
Why John Maynard Keynes remains so popular beggars my imagination.
It is the Austrians turn...
I remind you of this: