Evidence-Based Economics

There is a movement in medicine to require that applications for licenses to sell a new drug be “evidence-based.” By contrast, trained economists view their discipline as having already achieved this scientific standard. After all, they express their ideas with mathematics and arrive at quantitative estimates of implied relationships from empirical data.

But economics is not evidence-based in selecting its theoretical paradigms. Economic policy initiatives are often taken without all the empirical pre-testing that could have been done.

A notorious example is postwar macroeconomic policymaking under the radical Keynesians. The radicals relied on Keynes’s untested theory that unemployment depended on “effective demand” in relation to the “money wage,” but their policy ignored the part about wages and sought to stabilize demand at a high enough level to ensure “full” employment.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

http://prosyn.org/wMaoDb2;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.