Sociologists would recognize economics as a science, or: How low can U go?

Paul Krugman noted on his blog Friday that the Federal Reserve’s estimate of the Non-Accelerating Inflation Rate of Unemploment (NAIRU), in other words the predicted lowest level of unemployment that won’t cause inflation to rise, has been falling for several years. “Estimates of how low U can go seem always to be a bit below the current level of unemployment,” he writes, and produces the following chart:

This chart reminded me of another visual, one that made quite an impact on me when I first saw it as an impressionable college student. Here is Trevor Pinch’s graph of the theoretical predictions for solar neutrino flux, taken from the published work of astrophysicists who were pushing to build a giant and costly neutrino detector.

From

From Collins and Pinch, The Golem: What You Should Know About Science, p. 130

As Collins and Pinch write in The Golem: What You Should Know About Science (drawing on Pinch’s 1986 book Confronting Nature), nuclear and particle physicists were skeptical about funding such a large astrophysical undertaking, especially when the detector might not detect anything at all. Therefore, “it was in [the astrophysicists’] interests to have a clear-cut prediction of a large signal which [they] could detect without ambiguity,” as the sociologists delicately put it. “There is some evidence that the predictions of the flux of solar neutrinos varied with physicists’ need for funding.” In 1964, when the project was funded, the predictions were high, but immediately thereafter they dropped dramatically. Collins and Pinch cite several scientists involved as saying that the project would never have been greenlit if the 1967 estimates of flux had been the estimates in 1964.

To Collins and Pinch, this tale points to “the interdependence of theory and experiment.” Likewise, Krugman suggests that NAIRU kept falling because unemployment did too, while inflation never appeared.

But I’ve always taken it to also capture the interdependence of theory and politics/economics: the way that even calculations and values produced by well-meaning and honest calculators at some distance from gritty reality can nonetheless be affected by incentives filtering down through systems and institutions. (A related example might be David Kaiser’s work on the relationship “between enrollments and epistemology” within the physics departments of Cold War universities.)

And so I suspect there’s also a relationship between the Fed’s falling estimate of NAIRU and what Krugman has called “inflation paranoia”: the constant warnings—including, importantly, by senior officials of the Federal Reserve—that inflation, if not catastrophic inflation, is just around the corner, and thus interest rates need to be raised. The incentives and interests at play are complex, but but by the standards of neutrino physics, such a relationship would be very scientific indeed.

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