From Philosophy and Social Science, chapter one, page 56.
Human science is largely ex post understanding. Or often one has the sense of impending change, of some big reorganization, but is powerless to make clear what it will consist in: one lacks the vocabulary. But there is a clear asymmetry here, which there is not (or not supposed to be) in natural science, where events are said to be predicted from the theory with exactly the same ease with which one explains past events and by exactly the same process. In human science this will never be the case.
The chapter was sent to me by a reader. Taylor makes much use of the term “interpretation,” as do I. I insist that economics consists of many frameworks of interpretation and few testable hypotheses, whereas in natural science it is the other way around.
An example that I give in my book is determinants of relative wages (between, say, men and women). One framework of interpretation is that of human capital. Another framework is power and privilege. There are many observations that fit both frameworks. There are some observations that better fit the human capital frameork, and there are some observations that better fit the power and privilege framework.
As an example of Taylor’s point, consider the financial crisis of 2008. It was predicted by no economic model. Yes, some economists had a model of the housing market that said “this is a bubble,” but none of them saw how the collapse of the bubble would tear through the financial system (as we know from the Big Short, a few oddball hedge fund guys did). And yet, all sorts of economists insist that they can interpret the financial crisis. As John Cochrane once said to me, many economists have the audacity to interpret the financial crisis as proving that they were right all along!
“as we know from the Big Short, a few oddball hedge fund guys did”
Do we even know this? What would be the lowest-risk bet on a financial crisis? Buying gold? Shorting the total stock market?
Re the “few oddball hedge fund guys”: a stopped clock is also right sometimes. How did these guys fare before the crisis, and how have they done afterwards?
Even physical science has its quantum foundation, and even some economics were able to predict large increases in the money supply were not going to lead to inflation. There is though, a shortage of those marking their beliefs to market, and some never learn anything.
There wasn’t an increase in the money supply. And even then I’m not sure they were correct. We had moderate inflation in a time we should have had extreme disinflation. So, they are largely arguing against 2 guys on the right and a giant strawman.
(“There wasn’t an increase in the money supply.” by this of course I mean there was a vast increase in reserves that were not actually monetized into the economy. I obviously know nothing about this except that I’m under the impression that The Fed has yet to unwind these, so the real answer is likely “too soon to tell.” But I also don’t go around hunting for one leftist who is not an expert in monetary economics to strawman.)
Also, raising bank reserves itself is disinflationary if I understand that correctly.
The poinit is, the Fed’s job was to save the banks, not to save the economy, stimulate growth and actual inflation.
Science is as unpredictable in either case. But the engineering is much different, the wrong ‘simile’ being used.