Monday, October 12, 2009

The Economics Nobel

I gripe about economics from time to time. It's not a science like chemistry or physics, which have real predictive power. All too often, predictions from economics lack some crucial parameter, like time. Markets will go back up as the economy improves. Um, yes, that's fine and believable, but when?

Part of the problem seems to be that economics is a strange mix of theoretical assumptions and preferences with empirical observations. It's good to see that the empirical side of things is getting attention from the Nobel Committee. I don't follow much of economics directly, so I'll take some comments from people who do (Henry at Crooked Timber, Adrian Cho at Science Insider).

Elinor Ostrom, one of this year's Nobelists, has spent a lot of time looking at how people actually manage the commons and what the requirements are for sustainable management. That's an important issue; many of our resources, like grazing land in the Western United States and fisheries more generally, are commons. In order to make economics more of a science, observation of how things actually work are essential. It's observations that are the basis of the physical sciences, not doctrinal statements of how things should be like "the invisible hand" of economics.

So congratulations to Elinor Ostrom, both for working to make economics a science and for her Nobel honor!

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