Economics/Tutorials

Economics as a science

Whether economics is a science is a question that would appear to a layman to economics to be esoteric and semantic, but it is of considerable interest to its professionals. It was claimed to be a science by John Stuart Mill, - a claim that was later challenged by Lionel Robbins and critically examined by Paul Samuelson . It has been pointed out that many economic theorems do not satisfy Karl Popper’s criterion that, for a proposition to be considered scientific, it must be falsifiable . The economic theory of utility, for example, yields tools that can be used in the development of further axiomatic theory but does not itself generate testable propositions. However, such tools can be used in the economic analysis of economic activity, just as Euclid’s theorems can be used in the analysis of physical phenomena. To the extent that the analysis yields testable propositions, it can nevertheless be considered scientific. But critics have claimed that the propositions of theoretical economics are seldom put to the test, and that even when the are, academic economists are apt to continue to put forward propositions that fail (The survival of the Heckscher-Ohlin theorem in face of the Leontief paradox has been cited as an example). Arthur Pigou has been quoted as saying that although abstract arguments cannot demonstrate what is empirically true, they can often reveal what is unproven or wrong.

Normative economics

Normative economics is commonly defined as the study of “what ought to be” in contrast to the study of “what is” . The term was put forward in a book by John Neville Keynes and drawn to the attention of the economics profession by Milton Friedman. In most people’s minds there is a normative background to many branches of economics. The results of research on poverty, inequality and unemployment, for example, are usually presented in the tacit or explicit context of their undesireability. That has led to attempts to classify certain categories of economic theory as normative (welfare economics is a common example - see Is this normative economics?) and to divide the body of economic theory into normative and positive categories. But the methodology of economics does not require any normative postulate: it is left to the user to attach one if necessary. The fact that it may sometimes be necessary to attach some normative rules to a theory in order to reach a practical conclusion does not make the theory itself normative. Objective analysis can be applied to the assessment of the contribution of a decision to a subjectively-chosen norm, but the analysis itself is conceptually distinct from the norm. The fact that widely-accepted norms are usually taken for granted does not mean that they can't be distinguished from objective criteria. The criterion that is used for the purpose of an entirely objective analysis has to be the (objectively estimated) net effect experienced by those affected.