There is a sharp difference between sciences such as physics, chemistry, and biology on the one hand, versus sciences such as psychology, sociology, and anthropology on the other. People refer to the former as “hard” and the latter as “soft,” and—especially among the hard scientists!—there is a general feeling that the so-called hard sciences are more rigorous and indeed “scientific” than the so-called soft sciences. Generally speaking, the smartest and most celebrated scientists in the world are found in the hard sciences; besides the obvious icon of Einstein, the physicists Richard Feynman and Stephen Hawking have also captured the popular imagination. In contrast, it is not nearly as prestigious to win awards in psychology, and few people could even name the top sociologists of the last century. While some people might condemn the particular physicists who helped create atomic weapons, even so the overwhelming majority support physics itself. Yet in another sharp contrast, many people are skeptical and even hostile to some of the social sciences, particularly economics and psychiatry.
What is going on here? If we hadn’t known the answer already, we might have expected things to be the reverse, where public opinion revered the scientists who studied people and not mindless particles.
One possible answer is that the social sciences have justified some pretty awful things, such as electroshock therapy for people incarcerated against their will, and the government-sponsored slaughter of millions of pigs during the Great Depression while Americans starved. So maybe these types of episodes are the reason many people distrust psychiatrists and economists. But again, why don’t people also tend to blame physicists for Hiroshima, or the chemists for gunpowder?
We suggest the reason is that the physics and chemistry behind powerful weapons are right. The physicists said to the military, “If you drop this object from an airplane, it will induce a fission reaction that will release an incredible amount of heat.” And the physicists were perfectly accurate in their predictions. In sharp contrast, the psychiatrists told the courts, “Give us authority to imprison people we think are mentally ill, and allow us to inject them with drugs and perform other experiments on them. This will make them well, and yield a society with adjusted people who do not exhibit aberrant, anti-social behavior.” Many of the supposedly top-notch economists too told governments during the 20th and 21st centuries: “Give us control of the printing press, and we will spare the world any more ravaging depressions and rampant price inflation.” Obviously, the track record of the psychiatrists and most influential economists is not nearly as laudable as that of the natural scientists.
For some reason, it seems that even the most accomplished geniuses in the social sciences can lead their disciplines down dead-ends, where more and more of the experts in the field (as well as the general public) begin to suspect that the “state of the art” is a waste of time. Many people would agree that “psychiatry was doing all right... until Sigmund Freud,” or that, “Economics took a major wrong turn when John Maynard Keynes came on the scene.” Yet almost nobody would say, “Isaac Newton did a lot of great work in physics, until that nutjob Einstein came along and ruined it.”
One important reason for this gulf between the success and prestige of the natural sciences on the one hand, versus the mediocre results and hostility to the social sciences on the other, is that the objects of study in the natural sciences are fairly simple, and their behavior seems to be governed by a concise set of rules. Consequently, the hard sciences can (typically) rely on controlled experiments to evaluate their theories. This is why it’s much less likely that physics will go down a cul-de-sac the way many people think Freudian psychology or Keynesian economics did. Physical theories make predictions about objects in the material world. It would be very difficult for a newfangled yet ultimately inferior theory to sweep the profession in a hard science (such as physics), because its inferiority would be demonstrated repeatedly in experiments. Einstein famously resisted some of the philosophical implications of quantum theory but no physicist (including him) could argue with the accuracy of the theory’s predictions about experimental measurements made on subatomic particles.
Since subatomic particles don’t (as far as we know) have minds, in order to understand their behavior—in order to “explain” subatomic particles—a theory in physics can’t be asked to do anything more than to predict, with greater and greater precision and accuracy, what these particles will do in various circumstances. Now we should point out that in actual practice, things are not so simple in day-to-day physics. One theory may yield better predictions in a few experiments, while another theory may be simpler and more elegant. Some physicists may “believe in” the more elegant theory, and search for possible flaws in the experiments that cast doubts on their preferred theory. Even so, in the long run a theory in the hard sciences that systematically and unambiguously yields better predictions will eventually displace its rivals.
Most professionals in the social sciences think that the same method—the “scientific method”—should be used in their fields as well. However, the problem is that, quite literally, the objects of their study have minds of their own. It has proved fiendishly difficult to come up with a set of concise laws that accurately predict the behavior of people in various circumstances. In the social sciences, especially economics, things are so much more complicated that in many cases it is simply impossible to perform a truly controlled experiment.
To illustrate this important difference between the natural sciences and economics, first suppose two groups of physicists are arguing about the strength of the electric charge on a certain particle. After conducting an experiment using a clever new technique, one group in Australia announces that the previous estimate needs to be revised. However, the rival group of physicists argues that the Australian experiment is flawed, because the laboratory’s proximity to the South Pole distorted the measurements. They settle the dispute by conducting the same experiment at several different latitudes, to see if the measured results move closer to the previous estimate as the laboratory gets closer to the equator. The crucial assumptions behind all of this research are that the underlying laws governing the particles are the same, and that the experimenters can hold every other (relevant) factor constant while isolating the effects of the magnetic charge emanating from the earth’s poles. The story we just told gives an idea of why physics seems to “work” so well; there really is good reason to suppose that over the years, the physicists will develop theories with greater and greater accuracy in predicting how the physical world works.
Things are not nearly as straightforward when two groups of economists argue over rival theories. For example, one group of economists—the Keynesians—believe that the Great Depression was caused by a collapse in “aggregate demand,” and that President Herbert Hoover and then Franklin D. Roosevelt should have pushed through massive government deficits—spending borrowed money—to counteract the slump. A different group of economists—the Austrians—disagree strongly, and instead think that the initial crash in 1929 was caused by a preceding “boom” engineered by the Federal Reserve, which is the U.S. central bank established by the government. According to the Austrians, Hoover and Roosevelt made the Depression drag on for more than a decade with their misguided interventionist policies. The Austrians dispute the Keynesian deficit theory, pointing out that Hoover and FDR ran what were at the time record high (peacetime) budget deficits during their administrations, which coincided with the slowest and most agonizing recovery in U.S. economic history. The Keynesians counter that, large as the deficits were, the government “obviously” didn’t borrow and spend enough, as proved by the lingering unemployment.
At this early stage of the book, we have not yet mastered the concepts to proceed further with this actual dispute. (In subsequent lessons, you will learn the tools you need to better appreciate the two sides of the argument.) For now, the point is that the dispute remains unresolved, even though professional economists have been arguing about the causes of the Great Depression for more than seventy years. The controversy won’t die, because the exact conditions of the world economy in the late 1920s were unique. Economists can’t test the Keynesian theory by, say, holding everything else constant except doubling the U.S. federal budget deficit in 1932, in order to observe the effect on the unemployment rate.
Economists Can’t Agree on the Right Medicine
[T]he proper injunction to government in a depression is cut the budget and leave the economy strictly alone.
–Austrian School economist Murray Rothbard
Just as we saved our way into depression, we must squander our way out of it.
–Business Week economist Virgil Jordan, writing in 1932
Quoted in Robert P. Murphy, The Politically Incorrect Guide to the Great Depression and the New Deal (Washington, D.C.: Regnery, 2009), pp. 52, 57
It is no doubt true that economists who, for moral or political reasons, endorse larger government spending, will tend to subscribe to the Keynesian arguments about the causes of the Great Depression. It is also true that opponents of “Big Government” will tend to be attracted to economic doctrines that stress the benefits of low taxation and slim government budgets. But it is the inability to perform controlled experiments that allows the persistence of such diametrically opposed economic theories, with both camps firmly convinced that they are right and their opponents are either dishonest or sloppy. These passions are on a much tighter leash in the hard natural sciences, because in those disciplines the facts “speak for themselves” to a much greater degree than in the social sciences.
Fortunately, all is not lost. Even though the methods of the natural sciences are of limited use in economics, there are other ways of discovering economic principles or laws, relying on techniques that are not available to the physicist or chemist. As you master the lessons in this book, you will gradually develop a new framework for interpreting the world. Things that seemed incoherent before will make perfect sense to you. And as you will see, the lessons in this book will not appeal to experimental or even historical results to prove their validity. Once you have grasped the essential points of each lesson, they will be yours forever. You may decide that the concepts are more or less useful to you, but you will never need worry that newly published economic research will render them false. How is this possible? We explain in the next section.