Economics is not an exact science.

You will perceive that economy, scientifically speaking, is a very contracted science; it is in fact a sort of vague mathematics which calculates the causes and effects of man's industry, and shows how it may be best applied. There are a multitude of allied branches of knowledge connected with mans condition; the relation of these to political economy is analogous to the connexion of mechanics, astronomy, optics, sound, heat, and every other branch more or less of physical science, with pure mathematics.

In spite of all the foregoing, there is a science of economics, a true, and even exact, science, which reaches laws as universal as those of mathematics and mechanics. The greatest need for the development of economics as a growing body of thought and practice is an adequate appreciation of the meaning, and the limitations, of this body of accurate premises and rigorously established conclusions. It comes about in the same general way as all science, except perhaps in a higher degree, i.e., through abstraction. There are no laws regarding the content of economic behavior, but there are laws universally valid as to its form. There is an abstract rationale of all conduct which is rational at alt, and a rationale of all social relations arising through the organization of rational activity.

Economics is a social science, not a physical science.

Economics is not politics. One is a science, concerned with the immutable and constant laws of nature that determine the production and distribution of wealth; the other is the art of ruling.

Economics is a science of thinking in terms of models joined to the art of choosing models which are relevant to the contemporary world. It is compelled to be this, because, unlike the typical natural science, the material to which it is applied is, in too many respects, not homogeneous through time. The object of a model is to segregate the semi-permanent or relatively constant factors from those which are transitory or fluctuating so as to develop a logical way of thinking about the latter, and of understanding the time sequences to which they give rise in particular cases.
Good economists are scarce because the gift for using "vigilant observation" to choose good models, although it does not require a highly specialised intellectual technique, appears to be a very rare one.

The Science of Economics does not deal with true happiness nor even with well-being in material things. It deals with a strictly limited field of what is called "Economic Wealth," and if it goes outside its own boundaries it goes wrong.

As conceived in this book, economics is the science of rational choice in a world─our world─in which resources are limited in relation to human wants. The task of economics, so defined, is to explore the implications of assuming that man is a rational maximizer of his ends in life, his satisfactions─what we shall call his “self-interest.” Rational maximization should not be confused with conscious calculation. Economics is not a theory about consciousness. Behavior is rational when it conforms to the model of rational choice, whatever the state of mind of the chooser.(...) Nor is perfect rationality assumed; rational-choice theory allows us to assume that rationality is “bounded” because of human cognitive limitations, although another way to think of those limitations is as costs of absorbing and using information.

The position I favor is that economics is a science, but a rather pathological one.

Since economics deals with human beings, the problems of its scientific treatment involves fundamental problems of the relations between man and his world. From a rational or scientific point of view, all practically real problems are problems in economics. The problem of life is to utilize resources "economically," to make them go as far as possible in the production of desired results. The general theory of economics is therefore simply the rationale of life. - In so far as it has any rationale! The first question in regard to scientific economics is this question of how far life is rational, how far its problems reduce to the form of using given means to achieve given ends. Now this, we shall contend, is not very far; the scientific view of life is a limited and partial view; life is at bottom an exploration in the field of values, an attempt to discover values, rather than on the basis of knowledge of them to produce and enjoy them to the greatest possible extent. We strive to "know ourselves," to find out our real wants, more than to get what we want. This fact sets a first and most sweeping limitation to the conception of economics as a science.

Well, I will say this. And this is the main thing to remember. Macroeconomics -- even with all of our computers and with all of our information -- is not an exact science and is incapable of being an exact science. It can be better or it can be worse, but there isn't guaranteed predictability in these matters.

Economics is the most human of sciences. It is the science of wants and frustrations. It is psychology subject to the abstract, amplifying forces of mathematics.

Economic theories are infinitely diverse in their predictive power. Entirely too many have zero predictive power-they are statements of tautologies. Thus the statement that to maximize profits one should operate a firm where marginal revenue equals marginal cost is a mere mathematical statement of the condition for a maximum. The example we gave of search theory is not a tautology because we can identify the factors that influence costs and returns.· Some theories have negative power: they predict the opposite of what happens (and then become useful in the hands of a sophisticated user).

What makes economics different from and inferior to other sciences is the tenacity with which it holds to its core beliefs in the face of either contrary factual evidence or theoretical critiques that establish fundamental inconsistencies in its intellectual apparatus.'''