Economics is not a Science

But it's important to understand what a Science is. See below for the details.

This is a companion piece to my essay Your Mainstream Economics Decoder Ring

---

In 2007, most mainstream economists were confidently predicting continued economic stability. Their sophisticated mathematical models suggested that a financial crisis of the magnitude that struck in 2008 was virtually impossible—perhaps a "once in a century" event. When the global economy collapsed anyway, these same economists didn't abandon their failed theories. They simply added new complications to preserve the original framework.

This wasn't an isolated failure. It's the pattern that defines modern economics.

Mainstream economics is not a science. I say this as someone who completed an undergraduate degree in economics and spent years learning its theories, mathematical models, and analytical methods. As a lifelong student and enthusiast of science and engineering as processes and disciplines of knowledge (I minored in Physics, Chemistry, Math, Computer Science, Social Science and was someone who aspired to the Tenure Track as a young man), it has taken me thirty years to be able to articulate my criticism of Economics clearly. This is not merely the complaint of a frustrated student—it is someone concerned about how economic dogmatism is driving a regressive and authoritarian agenda in the U.S.

Economics claims to be a scientific discipline that discovers universal laws governing human behavior and market dynamics. This claim is demonstrably false.

What we now call "mainstream economics"—the pure neoclassical approach that emerged as the dominant consensus in the 1980s alongside the rise of neoliberalism—lacks the fundamental characteristics that define science. This approach replaced the earlier neoclassical-Keynesian synthesis of the 1950s-70s. Real science requires three things: the willingness to test and potentially abandon basic assumptions, the ability to make reliable predictions, and openness to alternative explanations when evidence contradicts established theories. Economics exhibits none of these characteristics.

Instead, this relatively recent orthodoxy represents an ideological framework disguised as objective analysis—one shaped by both a misguided attempt to mimic physics and decades of systematic corporate influence on academic institutions.

To understand how we arrived at this state, we must examine the historical forces that shaped modern economics. The story begins with what economists themselves call "physics envy."

How Physics Envy Corrupted Economics

The story begins in the late 19th and early 20th centuries, when economics underwent what historians call "physics envy." Early neoclassical economists such as William Stanley Jevons and Léon Walras were profoundly influenced by the spectacular success of physics and mathematics in explaining natural phenomena and driving technological progress.

The timing shaped everything. Great advances in physics, biology, chemistry, and astronomy had unraveled many mysteries of the universe. The Second Industrial Revolution was transforming production from rudimentary techniques to extensive use of machines. Physics had enabled the construction of large bridges, transcontinental railroads, and the telephone.

This physics envy led early economists to misappropriate mathematical formalism from physics. They openly copied their models—many admitted doing so. But the fundamental problem was immediately apparent: humans are not particles.

To make their physics-inspired models function, economists were forced to assume a utility theory of value. This meant treating people's individual preferences as perfectly quantifiable and assuming that the amount of pleasure they obtained from consuming goods could always be measured.

This reduction of complex human behavior was a deliberate step designed to enable widespread use of mathematics and establish its dominance within the profession. The drive to emulate physics led economists to treat people as mechanical calculating machines—an approach that continues to dominate the field.

This physics-inspired methodology still shapes how economists are trained today. Graduate students learn sophisticated techniques for working within the established mathematical framework. But they are rarely encouraged to question whether that framework corresponds to reality. Students master complex mathematical techniques for analyzing markets and modeling economic behavior, yet seldom ask whether these models actually describe how people behave.

Consider the basic assumptions that underpin most economic theory. People always make rational decisions to maximize personal benefit. Markets naturally move toward stable balance. Everyone has access to perfect information. These are not treated as testable hypotheses—they are treated as unshakeable starting points.

When real-world evidence contradicts these assumptions—which it frequently does—economists typically add complicated adjustments to preserve the original framework rather than question it.

The empirical evidence against these assumptions is overwhelming, even at the individual level. Decades of research in behavioral economics has demonstrated that people systematically violate these rational actor assumptions. People exhibit cognitive biases, make decisions based on social preferences rather than pure self-interest, and have limited ability to process information—exactly what you'd expect from actual humans rather than calculating machines.

Yet mainstream economics continues to build models on assumptions that have been empirically disproven at both the individual and aggregate levels. The field treats behavioral economics as a curious side discipline rather than a fundamental challenge to its core methodology.

Compare this to genuine sciences. Physics was completely transformed by relativity and quantum mechanics when existing theories could not explain evidence. Biology was revolutionized by evolution and later by genetics. Chemistry evolved from alchemy to modern atomic theory. In each case, scientists abandoned beautiful, established theories when they ceased to explain observations.

Economics demonstrates no such willingness to revise core beliefs. Alternative approaches that might better explain historical patterns or predict future events are marginalized rather than subjected to rigorous testing against mainstream models.

As economist Steve Keen observes, neoclassical economics has become "a degenerative research program, not generating new knowledge. It primarily grows a belt of protective auxiliary hypotheses to shield its core beliefs from critique." This represents the antithesis of scientific methodology.

But the problems with economics run even deeper than its refusal to abandon failed theories. The very structure of the discipline reveals it operates more like a belief system than a science.

Why Competing Schools Reveal Economics Isn't Science

To understand how economics maintains its rigid orthodoxy, it is essential to recognize a conflict most people have never heard of: the divide between "orthodox" and "heterodox" economics. This division reveals something crucial that distinguishes economics from genuine sciences—the existence of fundamentally incompatible schools of thought that disagree not just on details, but on basic questions about how economies function.

In real sciences, competing theories eventually get resolved through evidence and experimentation. While scientists may debate the frontiers of knowledge, they generally agree on fundamental principles. Physics has moved beyond debates about whether atoms exist; biology has settled the question of evolution; chemistry accepts atomic theory. The disagreements in science occur at the cutting edge, not about core foundations.

Economics is different. After more than a century of development, economists still cannot agree on basic questions. Do free markets naturally tend toward equilibrium or instability? Should governments intervene in recessions or let markets self-correct? Are financial crises inevitable features of capitalism or preventable policy failures? These are not marginal disputes—they represent fundamentally different understandings of how economies work.

Orthodox economics (also called "mainstream" or "neoclassical") dominates universities and policy discussions. It's built around assumptions about rational actors, market equilibrium, and perfect information borrowed from physics. This school views markets as naturally self-correcting and generally efficient. Government intervention is seen as potentially harmful except in limited cases of "market failure."

Heterodox economics encompasses various alternative schools that fundamentally disagree with these assumptions:

• Post-Keynesian economics emphasizes uncertainty, instability, and the role of money and debt in creating boom-bust cycles

• Institutional economics focuses on how social institutions, power structures, and historical context shape economic outcomes

• Behavioral economics incorporates psychological insights showing that people don't actually behave as rational calculators—despite decades of experimental evidence contradicting rational actor assumptions

• Ecological economics considers environmental limits and sustainability as central economic constraints

• Modern Monetary Theory challenges orthodox views about government deficits and money creation

These schools don't just disagree on policy—they offer completely different explanations for basic economic phenomena like unemployment, inflation, and financial crises. They use different methodologies, rely on different evidence, and reach different conclusions about how economies function.

Here's what makes this unscientific: heterodox economists are systematically marginalized within the profession rather than their ideas being tested against orthodox theories. They are concentrated in lower-tier institutions, excluded from top academic journals, and rarely invited to major conferences. Many have seen their careers damaged simply for questioning orthodox assumptions. As Steve Keen notes, "the profession marginalizes those who try and address these problems. Academic employment is based on publication. But the more prestigious the economics journal, the less likely a non-neoclassical paper will be published therein."

A genuine science would welcome these alternative perspectives and subject them to rigorous testing against orthodox theories. The fact that economics maintains competing schools that fundamentally disagree on basic questions—and resolves this through institutional power rather than evidence—reveals that it functions more like competing ideologies than scientific theories.

What is an ideology? An ideology is a system of beliefs and values that provides a framework for understanding the world and justifying particular arrangements of power and resources. Unlike scientific theories, ideologies are not primarily concerned with objective truth but with promoting particular interests and worldviews. They tend to be self-reinforcing, resistant to contradictory evidence, and more concerned with maintaining coherence and legitimacy than with accuracy.

This is precisely how economics functions. Rather than healthy scientific debate leading to resolution through evidence, economics has created an intellectual monoculture that reinforces orthodox assumptions while excluding challenging ideas through institutional power rather than scientific merit.

The consequences of this ideological approach become starkly apparent when we examine economics' track record at its most basic scientific task: making predictions about the phenomena it claims to understand.

The Spectacular Failures That Expose the Pretense

The clearest evidence that economics is not scientific comes from its spectacular failures to predict or explain major economic events. Real sciences make testable predictions that either succeed or fail. When theories fail consistently, they are revised or abandoned.

The 2008 Financial Crisis: Most mainstream economists failed to predict it. Their models suggested such a crisis was virtually impossible—perhaps a "once in a century" event. The few economists who did predict it were largely heterodox thinkers who had warned about financial instability for years. Yet after the crisis, the mainstream did not abandon failed models; it merely adjusted them slightly.

The Stagflation of the 1970s: Orthodox theory maintained that high inflation and high unemployment could not coexist simultaneously—the famous "Phillips Curve" suggested they moved in opposite directions. When stagflation occurred, orthodox economists were baffled. The explanation eventually came from heterodox economists who understood that inflation could be driven by supply shocks and institutional factors, not merely demand.

Japan's "Lost Decades": After Japan's asset bubble burst in 1990, mainstream economists confidently predicted quick recovery based on their models. Instead, Japan experienced more than twenty years of economic stagnation that orthodox theory could not explain or remedy.

In genuine science, such repeated failures would trigger fundamental reconsideration of basic assumptions. In economics, they are treated as anomalies while core frameworks remain untouched.

Why does economics persist with approaches that consistently fail to explain or predict major economic events? The answer lies in a fundamental flaw in how the field approaches the relationship between individual behavior and large-scale economic patterns.

The Fundamental Methodological Flaw

These repeated failures to predict major economic events point to a deeper problem than simply getting specific forecasts wrong. They reveal that economics suffers from a fundamental methodological flaw in connecting individual behavior to large-scale economic patterns. The field operates on the assumption that the whole economy can be understood by studying individual choices and aggregating them. In other words, macroeconomics (studying whole economies) is simply microeconomics (studying individuals) scaled up.

But this reductionist approach does not correspond to reality. Complex systems often behave in ways that cannot be predicted from their individual components. The economy is such a system. Millions of individual decisions interact to create large-scale phenomena that follow different patterns than individual behavior. Financial bubbles, economic cycles, and system-wide crises emerge from complex interactions in ways that cannot be understood by scaling up models of individual choice.

A simple example illustrates this problem perfectly. Consider the paradox of thrift: at the individual level, saving more money is rational and beneficial behavior. But if everyone tries to save more simultaneously, it reduces overall consumption. This reduces income for businesses, which leads to layoffs and reduced income for workers, making everyone worse off.

What appears rational and beneficial for individuals becomes destructive when applied across the entire economy. This fundamental contradiction—that individual rationality can lead to collective irrationality—reveals why you cannot simply aggregate microeconomic behavior to understand macroeconomic phenomena.

The 2008 financial crisis illustrates this problem perfectly. The crisis did not occur because people suddenly became irrational or because of external shocks. It emerged from systematic interactions of rational actors operating within particular rules and institutions—exactly the kind of systemic phenomenon that mainstream economics struggles to understand because of its reductionist focus on individuals.

Steve Keen, one of the few economists who actually predicted the 2008 crisis, identifies a fundamental absurdity at the heart of this approach: "If you look at mainstream economics there are three things you will not find in a mainstream economic model - Banks, Debt, and Money. How anybody can think they can analyze capital while leaving out Banks, Debt, and Money is a bit to me like an ornithologist trying to work out how a bird flies whilst ignoring that the bird has wings." This reveals how disconnected mainstream economics is from the actual financial system it claims to study.

This methodological flaw helps explain why mainstream economists consistently fail to predict crises while heterodox economists—who focus on systemic instability rather than individual optimization—often succeed. But understanding why such a flawed methodology became dominant requires examining the forces that shaped the discipline beyond its scientific pretensions.

The answer lies not in scientific progress, but in a deliberate campaign to influence academic thinking about economics and markets.

How Corporate Money Shaped the Discipline

What mainstream economics actually represents is not science but a particular political and economic worldview disguised as objective analysis. The theories that dominate economics today reflect priorities that emerged from corporate-funded think tanks and academic institutions, building on the field's existing vulnerabilities from its physics-envy origins.

The story begins in the 1940s with organized opposition to expanded government economic intervention. While some business leaders initially supported certain New Deal policies, a significant segment of wealthy industrialists and financiers organized to resist what they perceived as dangerous government overreach.

Groups such as the American Liberty League, funded by the DuPont family and other major corporations, established groundwork for a long-term intellectual campaign. The Mont Pelerin Society, founded in 1947 by economist Friedrich Hayek, brought together economists, philosophers, and political theorists committed to promoting free-market capitalism. However, the real transformation occurred through what might be termed academic capture.

The Strategic Use of Endowed Chairs

Corporations began systematically funding "endowed chairs" in economics departments—prestigious positions costing between one and five million dollars each that allow donors significant influence over hiring decisions and research priorities. Universities openly describe these chairs as enabling corporations to "give back to institutions that provide them with creative talent" while creating "opportunities for collaboration with scholars."

This was not merely charitable giving. These endowed positions allowed corporate interests to directly shape who would teach the next generation of economists and what ideas would be considered legitimate. Over decades, this funding gradually shifted the composition of economics faculties toward those favoring market-friendly approaches.

The scale of this influence is enormous. Major research universities typically maintain dozens of endowed chairs, many funded by corporations, banks, and business foundations. The revolving door between academia, government positions at institutions such as the Federal Reserve and Treasury Department, and corporate consulting creates additional incentive alignment beyond direct funding.

Global Expansion of the Model

This American-style economics was subsequently exported globally through institutions such as the World Bank and International Monetary Fund. Countries that resisted this approach—such as the East Asian development models that emphasized government-led industrialization—were marginalized in academic discourse, despite their remarkable economic success.

These ideas remained marginal during the government-intervention era of the 1950s through 1970s, but sustained corporate investment in academic infrastructure meant that alternative theories were ready when economic troubles in the 1970s created openings. By the 1980s, this corporate-sponsored approach had become "mainstream" economics.

The Political Project: Constraining Democratic Possibilities

The corporate capture of economics served a broader political purpose beyond simply promoting business-friendly policies. It created an intellectual framework that fundamentally constrains what democratic societies consider economically possible. This represents perhaps the most insidious aspect of economics' transformation from analytical tool into ideological weapon.

Central to this project is the "national debt narrative"—the persistent claim that government deficits are inherently dangerous and that governments must operate like households, carefully balancing their budgets. Mainstream economists know this analogy is false. Unlike households, governments create their own currency and cannot "run out of money" in the way households can. Yet this misleading framework dominates public discourse about economic policy.

The political utility of this narrative is enormous. By framing government spending as inherently constrained by debt concerns, it removes entire categories of social investment from democratic consideration. Universal healthcare, free public education, massive infrastructure investment, job guarantee programs—all become "unaffordable" not because of real resource constraints, but because of artificially imposed fiscal constraints that mainstream economics presents as natural laws.

Consider how deficit hysteria operates in practice. When governments propose spending on social programs, economists immediately raise concerns about "crowding out" private investment and creating unsustainable debt burdens. But when the same governments spend trillions on bank bailouts or military adventures, these economic constraints mysteriously disappear. The selective application of fiscal concerns reveals their ideological rather than scientific nature.

This framework serves small-government advocates perfectly. Rather than having to argue politically against popular social programs, they can claim such programs are economically impossible. Economics provides the intellectual cover for what is essentially a political project to limit democratic control over economic resources.

The marginalization of Modern Monetary Theory within mainstream economics illustrates this dynamic clearly. MMT economists demonstrate that governments with sovereign currencies face no inherent fiscal constraints—they can afford anything that doesn't cause excessive inflation. This insight would dramatically expand the range of policies democratic societies could consider. The vehement rejection of MMT by mainstream economists serves to protect the artificial constraints that limit democratic economic choice.

The influence of corporate funding extends beyond direct financial support. Even prestigious academic recognition has become part of this system of reinforcing orthodox thinking.

The Nobel Prize Reinforcement System

Even the Nobel Prize in Economics reflects this ideological capture. The prize typically recognizes researchers who develop clever mathematical techniques within established assumptions, not economists who challenge fundamental premises. Recognition rarely goes to heterodox economists who offer different frameworks, regardless of how well their ideas explain real-world events.

Critics note that there is essentially zero probability of any economist who challenges mainstream assumptions winning the Nobel Prize, despite the fact that heterodox approaches often provide superior explanations for economic crises, development patterns, and historical trends. The prize has become a mechanism for legitimizing a particular approach rather than recognizing genuine scientific achievement.

This creates a self-reinforcing cycle where prestigious recognition flows to those working within the established system, making that system appear more credible and making it harder for alternative approaches to gain legitimacy. Students observe who receives rewards and learn to work within orthodox boundaries if they want successful careers.

Given this extensive critique, it's important to clarify what economics actually represents and what role, if any, it should play in understanding human behavior and social organization.

What Economics Really Is

This critique should not dismiss the valuable insights that economic analysis can provide. Economic tools can illuminate important aspects of human behavior and social organization. Mathematical models can be useful for examining problems. Empirical research can reveal important patterns.

However, we must be honest about what economics actually represents: a collection of analytical tools and frameworks that can shed light on certain aspects of human behavior and market dynamics. Most of these tools work better at the individual level because mainstream economics treats large-scale economic phenomena as simply the sum of individual actions—an approach that does not correspond to how complex systems actually function.

What economics is not is a science in the rigorous sense of actively attempting to disprove its basic claims and advance human knowledge. Instead, mainstream economics is the product of two powerful historical forces: the late 19th-century desire to mimic the prestige and methods of physics, and the 20th-century systematic capture of academic institutions by corporate interests seeking intellectual legitimacy for free-market ideology.

The evidence for this conclusion, drawn from multiple independent lines of inquiry, is overwhelming.

The Overwhelming Evidence Against Economics as Science

The case against economics as science rests on multiple converging lines of evidence that, taken together, are overwhelming:

Methodological failures: Economics does not practice falsification, the cornerstone of scientific method. Core assumptions are treated as axiomatic truths rather than testable hypotheses. When evidence contradicts these assumptions, economists preserve frameworks rather than revise them.

Predictive failures: Unlike genuine sciences, economics has repeatedly failed to predict major phenomena within its domain. The 2008 crisis, stagflation, and Japan's stagnation were either unpredicted by mainstream theory or actively contradicted by it.

Unresolvable theoretical disputes: The persistence of fundamentally incompatible schools of thought that disagree on basic questions reveals that economics functions like competing ideologies rather than scientific theories. Real sciences resolve such disputes through evidence; economics resolves them through institutional power.

Institutional capture: The discipline systematically marginalizes alternative approaches while rewarding those who work within orthodox boundaries. This represents the opposite of scientific openness to competing explanations.

Historical origins: The field's mathematical formalism arose not from scientific necessity but from "physics envy"—a cultural desire to appear scientific by copying physics methods, even when inappropriate for social phenomena.

Corporate influence: Decades of systematic corporate funding of academic positions, think tanks, and research programs have shaped the discipline to serve particular political and economic interests rather than pursue objective knowledge.

Political constraints: The discipline promotes narratives like deficit hysteria that artificially limit what democratic societies consider economically possible, serving small-government advocates who want to constrain public investment and social programs through claims of economic impossibility rather than political argument.

Reductionist fallacy: The insistence that macroeconomic phenomena can be understood by aggregating microeconomic behavior ignores how complex systems actually work, leading to fundamental misunderstanding of economic dynamics.

Each of these problems alone would raise serious questions about economics' scientific status. Together, they demonstrate conclusively that mainstream economics is not science but ideology—a sophisticated intellectual framework designed to legitimize particular political and economic arrangements while maintaining the appearance of objective analysis.

Steve Keen, who has spent decades documenting these failures, states the conclusion directly: "The position I now favor is that economics is a pre-science, rather like astronomy before Copernicus, Brahe and Galileo. I still hold out hope of better behavior in the future, but given the travesties of logic and anti-empiricism that have been committed in its name, it would be an insult to the other sciences to give economics even a tentative membership of that field."

Economics matters too much to be left to economists operating under false pretenses. Until the field develops genuine scientific humility, methodological pluralism, and independence from corporate influence, it will remain what it is today: an elaborate system of beliefs masquerading as knowledge, serving power rather than truth.

It is not science.