A Reply to Russ Roberts on the Scientific Status of Macroeconomics

As an introduction to his new EconTalk discussion with Robin Hansen, George Mason University economists Russ Roberts writes the following:

As far as I know, no prominent market-oriented economist has come out in favor of a trillion dollar increase in government spending as a way to improve the economy. Every market-skeptical economist that I have heard is in favor of it on the grounds that it will improve the economy. Each side claims to have empirical support for its position.

What does this tell you about economics as a science? What should a non-economist conclude?

I replied in his comments section as follows:

Hayek’s point is that economists are looking in exactly the _wrong_ place for the empirical facts grounding the explanatory power of economics.

Empirical fact:

individual knowledge is limited

Empirical fact:

the world presents us with a place in which economic efforts are massively coordinated

Empirical fact:

there is a logic of valuation, which human beings use to order their affairs.

Empirical fact:

This logic of valuation extends to production resources

Empirical fact:

Most production resources are non-permanent

Empirical fact:

Relative prices transmit knowledge beyond that known to a single mind


From these empirical facts, you get Hayek’s enormously powerful empirical explanation of the trade cycle.

Most of the “data” you find in “macroeconomics” is trace data which needs to be explained.

It isn’t stuff governed by simple two-variable “laws”, or a law-governed piece of statistical mathematics.

And these socially constructed data points are _not_ governed by the pseudo-science of “Keynesian economics”.

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