Popular understandings of economics often attempt to incorporate the methodology of natural sciences as the supposed key to economics. Some economic experts are of the view that the methods employed by the natural sciences, such as advanced mathematics, are important tools for the assessments of historical data to establish the state of an economy. It is also believed that the knowledge secured from the assessment of the empirical data is likely to be tentative since it is not possible to know the true nature of reality. Thinkers such as Milton Friedman held that the best approach to comprehend this elusive reality is to build a model that could generate accurate forecasts.
However, what about a situation where the model does not generate accurate forecasts yet its structure seems to be well-designed? Or, how do we treat models of different structures that generate accurate forecasts? To make sense of the data, one must necessarily have a theory; one which stands on its “own feet,” and did not originate from the data.
Natural science methodology not applicable in economics Could it be valid to employ the methodology of natural sciences—like physics and chemistry—to economics? According to Murray Rothbard, This methodology [empiricism], briefly, is to look at facts, then frame ever more general hypotheses to account for the facts, and then to test these hypotheses by experimentally verifying other deductions made from them.
Some economic experts are of the view that the methods employed by the natural sciences, such as advanced mathematics, are important tools for the assessments of historical data to establish the state of an economy.
Ludwig von Mises held that since causality emanates from human beings and their choices, no quantitative analysis can ascertain the causes in economics.
Most likely he will discover that the main reason for the discrepancy between the observed data and the theory is on account of central bank monetary policies, which have distorted the market interest rates.
A theory that rests on the foundation that human beings are consciously and purposefully employing means to reach goals—human action—conforms with this requirement.
The theory that human beings are acting, consciously and purposefully, cannot be refuted, because anyone that tries to do this does so consciously and purposefully (i.e., he contradicts himself).
https://mises.org/mises-wire/relevance-natural-sciences-methods-economics
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