Economics is considered to be a soft science. Of the soft sciences, it is the hardest, but nevertheless, it remains soft in nature. When we discuss social sciences vs. science sciences it must be clear that science refers to the (theoretically) factual topics of physics, chemistry, biology, math, and more. The social sciences include anthropology, sociology, psychology, economics, english, religion, and much more.
Of these social sciences, economics places the highest importance on mathematical deduction of theories and views, thereby being a bit more "factual". However, nearly any topic in this world is subject to impression based on ones' individual beliefs. Even the hard sciences face intrusion from personal viewpoints, an example being religious scientists who reject or alter some treatises regarding the worlds' creation based on their personal (arguably, non-scientific) beliefs. Of course, almost all the sciences have changed as our understanding of the world has deepened - this is the very nature of academia; it is in a current state of flux.
The danger lies in alleging that economics is a factual science, un-swayed by one's weltanschauung (world view and philosophy of life). At the core, economics is a balancing act between equity and efficiency. The side of the debate you take depends on your views regarding fellow man: their potential to succeed, their value, and usefulness of equality. (More on this in an upcoming post) The philosophical underpinnings of economics are precisely why we cannot take the subject as cold, hard, fact.
It is my strong belief that the most advantageous component of economics is its ability to apply a framework around issues that are difficult to quantify, allowing you to arrive at a factual conclusion. The caveat here is that this conclusion is based on your framework and not indicative of an absolute answer outside of the theoretical conditions of the model. If society moves to solve the issue with the framework you have in mind, then the absolute answer may be what the majority advocates for. Let me give an example:
A class I took regarding the economics of crime discussed what would be the optimal policy for gun control. We looked at murder, and came to the conclusion that the factor influencing whether or not someone would kill was time. We segmented those who commit murder into 2 groups: those who rashly commit murder in the heat of conflict, and crazy people who pre-meditate a murder they commit. For those pre-meditating murder, almost any policy regarding guns would not have an effect - these people would find another way to kill, as they are set on the murder happening.
On the other hand, people committing murders in the heat of the moment are often doing so without thinking. Shooting someone with a gun requires a split second commitment of pulling the trigger, and is easy to do without thinking through. Stabbing someone with a knife, for example, is much more deliberate and requires one to really consider their actions as they are forced to literally get blood on their hands. So in finding a policy that will affect the latter group (heat-of-the-moment murderers), it is clear that forcing them to spend the longest time pondering their act will dissuade many would-be killers. Thus, policies banning guns would be advantageous. If banning knives were an option, this would have a similar effect. Imagine how few people would kill if they had to do it with their bare hands!
This case study can be applicable to suicide as well. The methods which allow the individual to induce their own death fastest are those which we should attempt to restrict, in order to force the individual to consider their decision (more time) and hopefully change their mind.
Now before any pro-gun people jump down my throat, let me emphasize that this policy conclusion is based purely on murder being a function of time. If society were to decide that reducing the murder rate was our priority in gun legislation, this course would be the logical one. However, the real question of gun control has a great deal of other factors aside from just reducing the murder rate. For individuals who value personal liberty over reducing the number of murders (and/or suicides) in society, they will arrive at a different conclusion in an economic model. Do you now see how economics can be deeply biased based on ones' personal values?
This is an important thing to keep in mind when hearing any conclusions an economist presents. Economists for corporations and think tanks are particularly accused of shaping findings to fit their employer's agenda. It's easy to shape an economic framework to suit your desired outcome - one of the greater issues in economics, as it causes many to lose faith in the subject. It's a running joke that economists love to create elaborate theories that seem sensible are incorrect in practice (an issue particularly relevant to macroeconomics). This is the inherent dilemma economics faces - an economists' job is to quantify issues with far greater complexity and depth than a mathematical equation, and in doing so, they must make simplifications and assumptions.
For example, the three core assumptions neoclassical economics is shaped around are that economic actors have rational behavior, perfect information, and will act to maximize their utility¹. Just a few issues with these assumptions:
- If you've ever met just about any person ever in the universe, listened to a political debate, or tried to reason with a child, you know that most people don't act rationally.
- Perfect information would be ideal to ensure market participation (and really the whole world) is fair, but oftentimes information access is based on money (take financial data services like Bloomberg and Thomson Reuters) and education (thereby, ability to process information).
- Tying into the idea of rationality, the assumption that one would act in a way to maximize their utility might mean that in college, an individual stays home on a Friday night to study - this would help them ace their final and ultimately improve their future utility, but along the lines of humans lacking rationality, it is equally likely they will decide to go out anyway.²
In light of these enormous oversimplifications that govern the single largest branch of economic theory (probably what you learned in your introductory macroeconomic class), you can imagine that this might lead to models/theories being incorrect, "in a perfect world" kind of thoughts.³ This is why behavioral economics also exists, which takes into account the bounds of rationality that humans possess.
The various schools of economic thought are almost uncountable, floating in and out of favor as economic climates and social attitudes change. But you can see that they are nearly all governed by underlying views on human nature. Philosophers were coming up with ideas about man's true nature centuries before the first economic thoughts existed. The two subjects are intrinsically tied together, almost as though economics is the convergence of mathematics and philosophy. While mathematics is a hard science, philosophy is perhaps the softest science of all, leading us to grapple with the product of the two: the hardest soft science, economics.
Economics: where philosophy meets math
¹Utility is the satisfaction and sum of benefits a person receives, typically through consumption of various forms. Consuming education could increase someone's utility, as could consuming a beer. What affects an individual's utility will be determined by their personal preferences, but we can consider the idea of what someone "should want" versus what they actually want (rooted in rationality). Like right now, I really want a cheeseburger, but what I should want is to finish writing this definition. Ultimately, the cheeseburger will decrease my utility (future health consequences, potential cankles), but may increase it in the short-term. Utility is an umbrella term in a lot of ways. You can read more about it here.
²FOMO is real
³A neoclassical economist will vehemently disagree with me here, I think you can guess that I fall more in the behavioral economics side of things.
Money represents a social agreement, which has implications for how we value wealthy people. Bitcoin replaces the need for this social agreement with technology, and in doing so challenges the values we ascribe to wealth.