OPINION | If only economics was as easy as rocket science

Editorials & Columns
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

OVER the years, I have often heard “rocket science” used to describe the hardest things to do.

But as an economics professor, I recognize that the questions of social coordination economics addresses are in many ways much more complex and difficult, especially when it comes to controlling results.

Economics is difficult

After all, we have successfully sent rockets to many places in our planetary neighborhood, demonstrating a tolerable ability to solve enough of the relevant problems, yet many economic policies impose more harm than help. And the more one tries to control, the more the information and implementation issues undermine the possibility — much less the probability — of effectiveness.

In one important sense, rocket science is simply vector addition of the relevant forces. And the relevant relationships for generating rockets’ thrust are governed by physical laws and relationships that are stable and mathematically expressible. The problem is one of accurately measuring the needed information and controlling the relevant forces — that is, engineering very complicated things so they work as intended.

In contrast, there are some things about humanity and their interactions that comprise economic inquiry and are less easy to “solve” than the interactions of chemistry and physics since scarcity has no solution.

Rocket science and engineering focus on achieving already agreed-upon goals. That means solving disagreements on goals is not a major limitation. However, economic interactions among people are driven by the fact that we disagree on almost every specific goal — what, specifically, we want and how, when, where, for whom, etc., not to mention who should pay. Rather than achieving agreed-upon goals, economics focuses on resolving the tradeoffs between the conflicting desires of billions of people, and particularly the role of rights in doing so. And that is far different and more complicated than jointly attempting to achieve an already agreed-to goal and one big reason why “If we can put a man on the moon, we can solve social problem X” thinking is misleading.

Physics has constants

Many of the problems of rocket science and engineering involve physical constants that determine the relationships, such as the universal law of gravitation and equations that are stable and predict reliably. And as computing power and technology have advanced, rocket engineers have become far more capable of controlling flight. However, since economics deals with people, there are no such reliable constants and dependable equations precisely describing the relationships.

For example, the law of demand says people want to buy more at lower prices, other things equal. But it doesn’t tell us how much more. And that will change as other things that are assumed equal, in fact, change. Further, there are essentially infinite potentially relevant “other things” in economic relationships, many of which will be unknown or unmeasurable at the time, rather than the much smaller number of variables incorporated in rocket science.

And because people learn from their experiences, unlike molecules, relationships will change over time, but we don’t know exactly how much or how fast that will happen. Advancing computing power cannot overcome such problems. It remains the case that one cannot get from economics’ underlying principles to effective control of society.

The physics behind rocket science also precludes causation from traveling backward in time. Effects cannot precede causes. But that is often not true in economic relationships. Effects begin to show up as soon as people begin to anticipate future events, not just subsequent to their occurrence. For instance, corporate stock prices rose before Trump’s tax cut became effective. So causation can effectively run backward in time by way of changed expectations, with some effects happening before the cause. Further, we have no precise way to measure many changes in such expectations.

Variables in politics and economics

In physics, what will happen in a reaction is independent of what you think would happen. The physical laws that apply do so regardless of whether you expect them to. However, what policymakers and voters believe a policy will accomplish will change what is done, even if those beliefs are inconsistent with reality (e.g., higher minimum wages will benefit all low-skill workers).

In physics, there is no concern over elements’ rights, violations of them, or issues of fairness, justice, or equity toward them. However, as America’s founders attested so vehemently, rights are at the core of social interactions and government, violations of which can justify revolution. And unlike the physical sciences, where the goal of language is precision, in the social sciences, the language (and thus analysis) is often quite vague and inconsistent (e.g., current versions of “social justice” are inconsistent with the traditional meaning of “justice”), making clear communication, much less clear analysis, far harder.

What is the upshot of all this? Economics is not like physical sciences, and reasoning and analogies based on them are often misleading in economics. Further, they can be dangerous to society, particularly in the mouths of those who wish to subject others to their command and control. That is why Friedrich Hayek wrote,

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

In other words, economics is a science whose principles and logic tell us why we cannot know enough to control people, even if we do know enough to control rockets.

Gary M. Galles is a professor of economics at Pepperdine University. His recent books include “Faulty Premises, Faulty Policies” (2014) and “Apostle of Peace” (2013).

Shadow
Slider
previous arrow
next arrow
Shadow
Slider

Read more articles