Edward P. Lazear
Graduate School of Business
This research was supported in part by the National Science Foundation. I am grateful to Kenneth Arrow, James Baron, Gary Becker, Roger Faith, Claudia Goldin, Morley Gunderson, Larry Katz, Robert Lucas, Michael Schwarz, Andrei Shleifer, and Nancy Stokey for helpful comments and discussions.
Economics is not only a social science, it is a genuine science. Like the physical sciences, economics uses a methodology that produces refutable implications and tests these implications using solid statistical techniques. In particular, economics stresses three factors that distinguish it from other social sciences. Economists use the construct of rational individuals who engage in maximizing behavior. Economic models adhere strictly to the importance of equilibrium as part of any theory. Finally, a focus on efficiency leads economists to ask questions that other social sciences ignore. These ingredients have allowed economics to invade intellectual territory that was previously deemed to be outside the discipline’s realm.
Edward P. Lazear
By almost any market test, economics is the premier social science. The field attracts the most students, enjoys the attention of policy makers and journalists, and gains notice, both positive and negative, from other scientists. In large part, the success of economics derives from its rigor and relevance as well as from its generality. The economic toolbox can be used to address a large variety of problems drawn from a wide range of topics.
In earliest times, economics was not distinct from other social sciences or even philosophy. Aristotle and Plato discussed economic issues in the context of social philosophy. Adam Smith, Ricardo, and Malthus analyzed economic factors in broader contexts than most economists do today. The American Economic Association itself was hewn from the societies of other fields. The AEA was created as a joint effort of the American Social Science Association and the American Historical Association for the purpose of encouraging economic research.1
At least during the last four decades, economics has expanded its scope of inquiry as well as its sphere of influence. Neither luck nor the inherent charm of economists is responsible for the change. Rather, the ascension of economics results from the fact that our discipline has a rigorous language that allows complicated concepts to be written in relatively simple, abstract terms. The language permits economists to strip away complexity. Complexity may add to the richness of description, but it also prevents the analyst
Kiger (1963). Note that the current Allied Social Science Association (ASSA) is a different organization from the one the spawned the AEA.
Edward P. Lazear
from seeing what is essential.2
Our rigorous language can be used in many ways, but over the years, three themes have become fundamental in economics. First, economists assume that individuals engage in maximizing, rational behavior. Second, economics adheres strictly to the importance of equilibrium as part of any theory. Third, economists place a heavy emphasis on a clearly defined concept of efficiency. The starting point in economic theory is that the individual or the firm is maximizing something, usually utility or profit. Economists, almost without exception, make constrained maximization the basic building block of any theory. Many of our empirical analyses seek to test models that are based on maximizing behavior. When we obtain results that seem to deviate from what would appear to be individually rational, we re-examine the evidence or revise the theory. But the theoretical revisions almost never drop the assumption that individuals are maximizing something, even if the something is unorthodox. Few...
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