Economists often express incredulity toward people who target their criticisms at an amorphous entity called ‘economics’ (perhaps prefixed with ‘neoclassical’ or ‘mainstream’), instead of targeting specific areas of the discipline. They point out that, contrary to the popular view of economists as a group who are excessively concerned with theory, a majority of economic papers are empirical. Sometimes, even the discipline’s most vehement defenders are happy to disown the theoretical areas-such as macroeconomics-which attract the most criticism, whilst still insisting that, broadly speaking, economists are a scientifically minded bunch.
Perhaps surprisingly, I agree somewhat with this perspective. I think there is a disconnect within economics: between the core theories (neoclassical economics, or marginalism) and econometrics.* I believe the former to be logically, empirically and methodologically unsound. However, I believe the latter – though not without its problems – has all the hallmarks of a much better way to do ‘science’. There are several reasons to believe this:
First, econometrics has a far more careful approach to assumptions than marginalism. To start with, you are simply made more aware of the assumptions you use, whereas I find many are implicit in marginalist theory. Furthermore, there is extensive discussion of each individual assumption’s impact, of what happens when each assumption is relaxed, and of what we can do about it. For example: if your time-series data are not weakly stationary (loosely speaking, this means the data oscillates around the same average, with the size of the oscillations also staying, on average, roughly the same, like this) you simply cannot use Ordinary Least Squares (OLS) regression. There is no suggestion that, even though the assumption is false, we can use it as an approximation, or to highlight a key aspect of the problem, or other such hand waving. The method is simply invalidated, and we must use another method, or different data. Such an approach is refreshing and completely at odds with marginalist theory, whose proponents insist on clinging to models – and even applying them broadly – despite a wealth of absurdly unrealistic assumptions.