The field of macroeconomics is currently going through a bit of an existential crisis. There is a debate going on, spurred largely by the global financial crisis and economists' failure to 1) anticipate it 2) help create models and financial systems which might have avoided it. Paul Krugman wrote this piece in the New York Times in which he essentially attacked the hubris of modern economists, asserting that they had confused "beauty" (i.e. the apparent explanatory power of mathematically based economic models) with "truth". The article made University of Chicago economist John Cochrane very upset. Though the back-and-forth dynamic of the articles sometimes has the feeling of a schoolyard fight rather than balanced intellectual debate, I think it's still an important and interesting discussion.I side more with Krugman. I think Karl Popper would as well. You may not be familiar with Karl Popper, but he is probably one of the most important philosophers of science in the 20th century. Not to get too long winded or 'bloggy' about this, but if you're interested, I really recommend reading this abridged summary of Popper's philosophies on the (shortcomings of the) social sciences as commonly practiced.
"...These beliefs lead to what Popper calls ‘The Historicist Doctrine of the Social Sciences’, the views (a) that the principal task of the social sciences is to make predictions about the social and political development of man, and (b) that the task of politics, once the key predictions have been made, is, in Marx's words, to lessen the ‘birth pangs’ of future social and political developments. Popper thinks that this view of the social sciences is both theoretically misconceived (in the sense of being based upon a view of natural science and its methodology which is totally wrong), and socially dangerous, as it leads inevitably to totalitarianism and authoritarianism—to centralised governmental control of the individual and the attempted imposition of large-scale social planning. Against this Popper strongly advances the view that any human social grouping is no more (or less) than the sum of its individual members, that what happens in history is the (largely unplanned and unforeseeable) result of the actions of such individuals, and that large scale social planning to an antecedently conceived blueprint is inherently misconceived—and inevitably disastrous—precisely because human actions have consequences which cannot be foreseen. Popper, then, is an historical indeterminist, insofar as he holds that history does not evolve in accordance with intrinsic laws or principles, that in the absence of such laws and principles unconditional prediction in the social sciences is an impossibility, and that there is no such thing as historical necessity.
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"At a very general level, Popper argues that historicism and holism have their origins in what he terms ‘one of the oldest dreams of mankind—the dream of prophecy, the idea that we can know what the future has in store for us, and that we can profit from such knowledge by adjusting our policy to it.’ (Conjectures and Refutations, 338). This dream was given further impetus, he speculates, by the emergence of a genuine predictive capability regarding such events as solar and lunar eclipses at an early stage in human civilisation, which has of course become increasingly refined with the development of the natural sciences and their concomitant technologies. The kind of reasoning which has made, and continues to make, historicism plausible may, on this account, be reconstructed as follows: if the application of the laws of the natural sciences can lead to the successful prediction of such future events as eclipses, then surely it is reasonable to infer that knowledge of the laws of history as yielded by a social science or sciences (assuming that such laws exist) would lead to the successful prediction of such future social phenomena as revolutions? Why should it be possible to predict an eclipse, but not a revolution? Why can we not conceive of a social science which could and would function as the theoretical natural sciences function, and yield precise unconditional predictions in the appropriate sphere of application? These are amongst the questions which Popper seeks to answer, and in doing so, to show that they are based upon a series of misconceptions about the nature of science, and about the relationship between scientific laws and scientific prediction. "
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"This, then, Popper argues, is the reason why it is a fundamental mistake for the historicist to take the unconditional scientific prophecies of eclipses as being typical and characteristic of the predictions of natural science—in fact such predictions are possible only because our solar system is a stationary and repetitive system which is isolated from other such systems by immense expanses of empty space. The solar system aside, there are very few such systems around for scientific investigation—most of the others are confined to the field of biology, where unconditional prophecies about the life-cycles of organisms are made possible by the existence of precisely the same factors. Thus one of the fallacies committed by the historicist is to take the (relatively rare) instances of unconditional prophecies in the natural science as constituting the essence of what scientific prediction is, to fail to see that such prophecies apply only to systems which are isolated, stationary, and repetitive, and to seek to apply the method of scientific prophecy to human society and human history. The latter, of course, is not an isolated system (in fact it's not a system at all), it is constantly changing, and it continually undergoes rapid, non-repetitive development. In the most fundamental sense possible, every event in human history is discrete, novel, quite unique, and ontologically distinct from every other historical event. For this reason, it is impossible in principle that unconditional scientific prophecies could be made in relation to human history—the idea that the successful unconditional prediction of eclipses provides us with reasonable grounds for the hope of successful unconditional prediction regarding the evolution of human history turns out to be based upon a gross misconception, and is quite false. As Popper himself concludes, "The fact that we predict eclipses does not, therefore, provide a valid reason for expecting that we can predict revolutions." (Conjectures and Refutations, 340)
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"Popper's critique of both historicism and holism is balanced, on the positive side, by his affirmation of the ideals of individualism and market economics and his strong defence of the open society—the view, again, that a society is equivalent to the sum of its members, that the actions of the members of society serve to fashion and to shape it, and that the social consequences of intentional actions are very often, and very largely, unintentional. This part of his social philosophy was influenced by the economist Friedrich Hayek, who worked with him at the London School of Economics and who was a life-long friend. Popper advocated what he (rather unfortunately) terms ‘piecemeal social engineering’ as the central mechanism for social planning—for in utilising this mechanism intentional actions are directed to the achievement of one specific goal at a time, which makes it possible to monitor the situation to determine whether adverse unintended effects of intentional actions occur, in order to correct and readjust when this proves necessary. This, of course, parallels precisely the critical testing of theories in scientific investigation. This approach to social planning (which is explicitly based upon the premise that we do not, because we cannot, know what the future will be like) encourages attempts to put right what is problematic in society—generally-acknowledged social ills—rather than attempts to impose some preconceived idea of the ‘good’ upon society as a whole. For this reason, in a genuinely open society piecemeal social engineering goes hand-in-hand for Popper with negative utilitarianism (the attempt to minimise the amount of misery, rather than, as with positive utilitarianism, the attempt to maximise the amount of happiness). The state, he holds, should concern itself with the task of progressively formulating and implementing policies designed to deal with the social problems which actually confront it, with the goal of eliminating human misery and suffering to the highest possible degree. The positive task of increasing social and personal happiness, by contrast, can and should be should be left to individual citizens (who may, of course, act collectively to this end), who, unlike the state, have at least a chance of achieving this goal, but who in a free society are rarely in a position to systematically subvert the rights of others in the pursuit of idealised objectives. Thus in the final analysis for Popper the activity of problem-solving is as definitive of our humanity at the level of social and political organisation as it is at the level of science, and it is this key insight which unifies and integrates the broad spectrum of his thought."
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