A young man recently posed a question during a seminar on rational inquiry: How do we distinguish between a mistaken opinion and one that is not mistaken?
For context, recall the basic premise of rational thought: no theory, idea, or proposition can ever be definitively proven true. What we can do is prove that something is false. Human knowledge advances not by accumulating certainties, but by discarding errors.
Equally fundamental is the logical order of reasoning. First comes the formulation of a theory — an idea or proposition. Only then can that theory be tested against observable facts. Starting “from the facts,” or pretending that knowledge can somehow be “based on facts,” is itself a logical mistake. It leads to no reliable conclusions.
When we apply these simple, widely accepted rules of reasoning, something striking emerges: the overwhelming majority of modern economics does not meet the standards of rational inquiry. It does not even qualify as a true scientific discipline. Perhaps a few narrow subfields do, but the economics of the last generation certainly does not.
We are conditioned to mock gender studies while treating liberal economics as a serious science. Yet methodologically, both rest on equally shaky ground.
One student framed the dilemma well (I simplify his wording):
“Economics always works with extremely simplified models whose relation to the real world cannot be verified. If that’s true, then it is impossible to test them against facts — because facts belong to the real world. That would mean that economics is, in principle, incapable of scientific reasoning.”
Exactly. That’s the heart of the problem. It isn’t merely that economists do their work badly; it may be that their enterprise is structurally incapable of producing reliable results.
Consider the way economic knowledge is routinely misrepresented — often by economists themselves when speaking to the public. We hear confident assertions like:
-
“More competition will lower prices.”
-
“Raising the minimum wage will increase unemployment.”
But a more honest statement would sound like this:
-
“The entry of new competitors exerts a downward force on prices, but that force may be overwhelmed by other factors present in the market. It is entirely possible that prices will rise even as competition increases.”
-
“A higher minimum wage introduces a force that tends to raise unemployment, but other dynamics may offset it. It is therefore entirely possible for unemployment to fall after a wage increase.”
If economists spoke with such candor, their authority would collapse. Their pronouncements would sound less like science and more like weather forecasts — vague statements about competing forces whose relative strength cannot be measured.
In practice, the only workable approach is careful observation of the national economy and timely, pragmatic reaction — regardless of what the textbooks say. The choice of reliable indicators matters far more than any theoretical construction. Yet in today’s economics, that humble, empirical work is done by only a handful of people. In the Czech Republic, perhaps Ilona Švihlíková, Tomáš Doležel, or Jaroslav Šulc — and not many others.
Still, the young mathematician’s question cuts deeper. If economists can only describe one of many forces, how do we even know that such a force exists? Because it sounds plausible? So did medieval theories about angels.
Psychology or sociology can at least compare large samples. If we ask whether divorce causes depression, we can measure depression before and after divorce across thousands of cases. Economists have no such luxury. They cannot take a thousand national economies, raise the minimum wage in five hundred, and leave the rest unchanged.
What can they do? Only check the internal consistency of their own models. Hence the endless equations. But internal coherence is not the same as truth. The stars in an astrologer’s chart are internally consistent, too.
When the psychologist Daniel Kahneman actually tested economic behavior in the lab, his findings contradicted nearly every prediction of conventional economics.
And yet, there are limited ways to test broad economic hypotheses. For instance, do economies with stronger state intervention achieve higher or lower growth, stability, and living standards? Is there an optimal threshold of regulation beyond which performance declines?
Comparative studies of hundreds of national economies suggest that, up to a point, more regulated economies perform better — they grow more steadily, maintain lower debt, and experience fewer crises. That finding alone should give pause to every self-styled free-market absolutist.
The lesson is humbling. True knowledge in economics — as in all human affairs — begins with modesty. The modern economist, confident in his models, may be no wiser than a medieval theologian debating the flight patterns of angels.