Sergio M. Focardi - Is economics an empirical science? If not, can it become one?

1Department of Applied Mathematics and Statistics, Stony Brook University, Stony Brook, NY, USA

2De Vinci Finance Lab, École Supérieure d'Ingénieurs Léonard de Vinci, Paris, France

We will subsequently discuss why we argue that neoclassical economic and finance theory is not an empirical science as presently formulated—nor can it become one. 

In physics, observables are processes obtained through the theory itself, using complex instruments. Physical theory responds to empirical tests in toto; individual statements have little empirical content. In economics, given the lack of a comprehensive theory, observations are elementary observations, such as prices, and theoretical terms are related to observables in a direct way, without cross validation. This weakens the empirical content of today's prevailing economic theory.

We next critiqued neoclassical economics, concluding that it is not an empirical science but rather the study of an artificial idealized construction with little connection to real-world economies. This conclusion is based on the fact that neoclassical economics is embodied in DSGE models which are only weakly related to empirical reality.

Sergio M. Focardi - Is economics an empirical science? If not, can it become one?