Data impels economists to leave their armchairs at last - 3 min read
An article in the FT on 13 July by Tim Harford, one of the saner economists of our time, should be required reading for anyone perplexed by our collective failure to understand what’s going on out there. By the accepted norms of scientific inquiry, economics has failed us big time. It failed to predict the 2008 financial crash and the fractious debates which followed have failed to account coherently for most of what has happened since.
This is a pity, because the world has never been in greater need of reliable economics. Today’s cocktail of ecological fragility, depleting resources, social dislocation and stagnant productivity growth may well be placing us on the brink of catastrophe. It has probably never been more important for governments to have something with the attributes of a science to guide their choices.
Is economics a science? Yes, but only in a sense which would have been recognised by mediaeval scholastics. Science has always involved elaborating practical observation into a theoretical understanding of our universe. But as practiced up until the 17th century, the prestige lay in theoretical understanding rather than practical observation; expertise was all about learned disputation at a purely theoretical level.
The Enlightenment and the birth of modern empirical science effectively reversed the priority. We discovered ways of looking more closely at things we thought we knew, and discovered that they were different from what we had previously thought. The progress of modern science can be charted by the instruments which enabled us to do so: Galileo’s telescope, Newton’s prisms, the cloud chamber, the electron microscope, the laser interferometer, etc. Developing ways of observing and measuring things ever more closely has been fundamental to modern science.
Back in the 1920s, Alfred Marshall described economics as “the study of humanity in the ordinary business of life”. But economics accorded nothing like the same priority as the physical sciences to finding better ways of observing and measuring humanity in the ordinary business of life. Its understanding of what was going on out there rested instead on broad, lagging, aggregate measurements (e.g. GDP) and doctrinal theories about how homo economicus made choices.
Tim believes that economics is now on the threshold of a change as revolutionary as the birth of empirical science. The explosion of new kinds of data and the progress of data science is bringing economics within reach of the holy grail of being able to observe the ordinary business of life in detail, in real time and at scale.
He instances three new kinds of data which are giving a far more accurate picture of human behaviour than we previously had: high resolution satellite images, administrative data (not in itself new but far more plentiful and available) and mobile phone metadata. There are of course many others but the principle is the same: new forms of data are capturing human behaviours far more accurately than traditional measurements: put them together and make them available to open-ended inquiry – and hopefully the odd ‘dumb question’ – and what you see may be very different from what you had previously thought.
He adds a caution: anyone who graduated with an economics PhD more than five years ago had no idea how to handle this data, and is frantically scrambling. That, of course, is where HARBR comes in. We bring this within reach by making it easier, cheaper and infinitely less laborious than it has ever been to combine disparate data sets for open-ended inquiry and doing so in collaboration with others. History shows that you only really get the quantum leap when something becomes easy to do and, often, only when more than one person is involved.