What a question! Economics IS a science and this is celebrated each year with the ‘Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel’. On the other hand, the incontrovertible fact of the matter is that economics is one of the most embarrassing scientific failures of all time. How to resolve this glaring contradiction?
First, we have to remind ourselves that science is well-defined for 2300+ years: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)
Economics is a scientific failure because it is materially and formally inconsistent. So how to get out of the mess, how to make economics a science? It’s in the news, the Bloomberg View Editorial Board has the answer: “Whenever an economist says ‘in our model’, beware. Demand to know what assumptions the model makes, and question those assumptions as severely as the theorists test for valid inference — because valid inference from bogus assumptions is useless.” (See intro)
That’s it. That is what already Aristotle said: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”
That is what already Keynes said: “For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premises.”
That is what already Hutchison said:“ For it can fairly be insisted that no advance in the elegance and comprehensiveness of the theoretical superstructure can make up for the vague and uncritical formulation of the basic concepts and postulates, and sooner or later ... attention will have to return to the foundations.”
So let us revisit the foundational assumptions. Microeconomics is based on these five hardcore propositions, a.k.a axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)
Methodologically, these premises are forever unacceptable. The axiom set contains THREE NONENTITIES: (i) constrained optimization (HC2), (ii) rational expectations (HC4), (iii) equilibrium (HC5). Every theory/model that contains a nonentity is A PRIORI false.
So, let us shredder microfoundations and move on. Keynes based macroeconomics on these propositions: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63)
Unfortunately, at this critical juncture, an error slipped in because Keynes did not come to grips with profit: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end, he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)
So BOTH microfoundations and macrofoundations are false. Now it holds: if the premises/ axioms are false the whole analytical superstructure is false. As a consequence, empirical tests yield either clear-cut refutations or inconclusive results.
Science requires always both, formal AND material consistency. Logical consistency is secured by applying the axiomatic-deductive method and empirical consistency is secured by applying state-of-the-art testing. The current state of economics is that neither Walrasianism, Keynesianism, Marxianism, Austrianism satisfies the criteria of formal/ material consistency. These approaches are PROVABLY false.
And at this point, scientific ethics kicks in. A scientist is supposed to abandon a falsified theory. Morgenstern reminded his fellow economists long ago: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.”
Walrasianism, Keynesianism, Marxianism, Austrianism are provably false but this scientific garbage is still around. This, in turn, means that in economics scientific standards are violated on a daily basis. The lack of the true theory has grave practical consequences: since Adam Smith, economic policy guidance has NO sound scientific foundation.#1
Economics needs a Paradigm Shift, that is, the replacement of false Walrasian microfoundations and false Keynesian macrofoundations by entirely new and consistent macrofoundations.
So, it is pretty obvious what it takes to make economics a science. It takes (i) competent scientists, (ii) a strict commitment to well-defined scientific standards, (iii) a paradigm shift, that is, the full replacement of scientifically indefensible Walrasianism, Keynesianism, Marxianism, Austrianism.#2
There is no place in science for the proto-scientific garbage that has hitherto been accepted as economics. And there is no place for fake scientists. The main problem of economics is how to get rid of the ‘throng of superfluous economists’ (Joan Robinson).
#1 Economists and the destructive power of stupidity
#2 From Orthodoxy to Heterodoxy to Sysdoxy
Related 'Economics: the simple logic of failure' and 'Economics: a science without scientists' and 'From microfoundations to macrofoundations' and ‘What Keynes really meant but could not really prove’ and 'Economics, methodology, morals ― a creepy freak-show' and 'Economists: Incompetent? Stupid? Corrupt?' and 'Delusions of useful idiots' and 'Economists’ eternal problem with methodology'. For details of the big picture see cross-references Incompetence and cross-references Failed/Fake Scientists and cross-references The Representative Economist.