fundamentals like income or even changes in income over time are somewhat measurable with some precision, [but] we are notoriously unreliable at the things the world really cares about and asks of our profession: why did income for this or that group go up by this or that amount? What will happen if this or that policy changes? Should the subsidy to college education be increased or decreased and if so, by how much? These much-demanded answers for precision and an understanding of the complex forces that shape the world around us are precisely the questions we are not very good at answering.
It is a long essay, difficult to excerpt. Pointer from Tyler Cowen.
I am writing an even longer essay along similar lines. Currently, the hope is to have it come out this summer.
In physics, you have what is known as “effective theory.” That is, you have a theory, like Newton’s laws, which works very well for certain problems. Moreover, physicists can tell you where it works and where it does not work.
The problem in economics is that we have speculative interpretations which we try to pretend are effective theories. For reasons that Russ Roberts goes into, we cannot get rid of conflicting speculative interpretations.
Economic variables with time are not stable. Time to completion can be altered by conspiracy. Unions and politicians do this. Unions get a favorable ruling and suddenly a bunch of boomers retire. Or politicians schedule debt according to election events rather than time to complete.
Noah has an important take on this.