Why does neoclassical thinking still dominate economics?

Nobel Prize in Economics winners Christopher Sims and Thomas Sargent: in the neoclassic mold. AAP

The Sveriges Riksbank’s Prize in Economic Sciences - or the Nobel prize in economics - awarded last week to Thomas Sargent and Christopher Sims- implicitly claims that economics is a science.

But how accurate is this claim?

Since its establishment in 1968, many have decried the prize’s elevation of economics to the status of a science. This, they argue, gives economics more credit than it deserves.

The critics certainly have a point.

Unlike the subjects studied by the physical sciences, the economy does not obey universal laws, but is a historically contingent human creation.

And unlike many of the other sciences, economics can actually shape its subject of study – through the influence of economic theories on economic policy, for example.

All of this would seem to put economics on much shakier ground than the physical and natural sciences.

But while these criticisms have merit, there’s also a sense in which economics does behave as a science like any other.

Indeed, it is the characteristics it shares with other sciences that helps to explain the rather one-dimensional nature of the Nobel Prize itself.

Scientific paradigms

To appreciate this, it is useful to know a little about the work of Thomas Kuhn and the concept of scientific paradigms. Kuhn wrote about science; he wanted to understand how science changed.

Through detailed historical study, he concluded that the standard account of the scientific method - where scientists formulated hypotheses and then set about trying to falsify them through experiments - was wrong.

An Occupy Wall Street protester. Flickr/ David Shankbone