Neoclassical Economics as a Predictive Social Science?

File:Laffer Curve.png
Source: Wikimedia Commons

So the big news is the Eurozone crisis and what to do about it. This obscures the bigger question, which is what to do about the system of international finance. I have an idea. Let’s get rid of it. Something seems simply wrong with the idea of a system of giant, closely integrated lending firms, backed up by nationally-owned central banks. New regimes of regulation, or the ‘utility model’ – where credit institutions are treated like nationalised water or electricity suppliers – are weasly halfway houses. Let’s go eliminativist. Why not? Think Distributism, without the anti-Semitism, the leanings towards theocracy, and the social conservatism. Ok, don’t think Distributism. Just think very, very different from the way things are now.

But I’m just a historian of philosophy. I have no idea what I’m talking about. I just feel like that would be the right thing to do. Before you accuse me of being naïve, however, consider what you’re accusing me of not knowing. Is the accusation that I don’t understand economics? The problem with that is that there is no reason to think that if I did understand economics I’d be any better placed to legislate for the future. At the risk of raining on a great ongoing parade, we don’t have a social science with predictive power. We don’t even, as Jerry Fodor said in a different context, know what it would be like to have a predictive social science. If I don’t know what the consequences of a policy will be, I take comfort in the fact that nobody else does either.

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