Running Head: THE DISMAL SCIENCE

The Dismal Science

Adam Tanielian
Mayville State University
Math 420

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Introduction
In his seminal work, Theory of Political Economy, William Stanley Jevons (1871)
ponders at length the question of whether or not economics shall be considered a science. One
would surely not expect to read about Albert Einstein, Dmitri Mendeleev, nor even Steve Jobs
entertaining questions regarding whether or not their disciplines qualified as sciences. Rather, it
is implicit that physics, chemistry, and engineering are sciences. Natural sciences gave birth to
modern technology, which should have laid to rest any doubt as to the merits and validity of
formerly paper-based ideas.
Merriam-Websters (2016a) simple definition of science is:
1) knowledge about or study of the natural world based on facts learned through
experiments and observation
2) a particular area of scientific study (such as biology, physics, or chemistry) : a
particular branch of science
3) a subject that is formally studied in a college, university, etc.
For the purposes of this essay, the third definition will be omitted because by that
standard, virtually everything would be a science, from fine arts to nuclear physics. Instead, this
research will rely upon the first two definitions, paying particular attention to the idea that
science leads to knowledge found in observation or experimentation within the natural world.
Scientific knowledge is typically categorized as fact, hypothesis, theory, or law, which the
National Center for Science Education (2008) defines:
Fact: In science, an observation that has been repeatedly confirmed and for all
practical purposes is accepted as true. Truth in science, however, is never final

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and what is accepted as a fact today may be modified or even discarded
tomorrow.
Hypothesis: A tentative statement about the natural world leading to deductions
that can be tested. If the deductions are verified, the hypothesis is provisionally
corroborated. If the deductions are incorrect, the original hypothesis is proved
false and must be abandoned or modified. Hypotheses can be used to build more
complex inferences and explanations.
Law: A descriptive generalization about how some aspect of the natural world
behaves under stated circumstances.
Theory: In science, a well-substantiated explanation of some aspect of the natural
world that can incorporate facts, laws, inferences, and tested hypotheses.
The word economics comes from the Greek words oikos and nomos, which
together refer to the management of a household (Boland, 1997). Oxford (2016a) defines
economics:
The branch of knowledge concerned with the production, consumption, and
transfer of wealth.
If economics were a science, its origins would predate the scientific method. Since the
late 19th century, at least, economics has integrated multiple forms of mathematics. Algebra,
calculus, linear algebra, and differential equations are applied used to work with, inter alia,
market movements, price elasticity, balance of trade, supply and demand models, potential
impacts of policies. Despite consistent inclusion of mathematics, however, this research shall

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discuss reasons why economics does not stand up to the rigid requirements of science. Instead,
economics is either an art or a pseudoscience, which Oxford (2016b) defines as:
A collection of beliefs or practices mistakenly regarded as being based on
scientific method.
Obscene Origins of Neoclassical Economics
Regarded as one of the fathers of the marginal revolution that prompted the transition
from classical to neoclassical economics, Jevons works were, and still are, highly regarded in
the field. Perhaps through the late 19th and majority of the 20th centuries, little would seem
amiss about Jevons theories, nor those of his counterparts, but as we move forward into still new
eras of globalization and advanced economies, new light is shed upon underlying flaws in earlier
generations, the sum of which seriously compromise the value of significant portions of their
works. While Jevons urged economists to utilize mathematics, which he thought a hallmark of
scientific inquiry, he failed to remove himself and his work from the less dignified racial politics
that plagued economic theorists.
Jean-Baptiste Say (1803) authored A Treatise on Political Economy, wherein he discussed
with some fluency the economics of slave trading in the Caribbean. According to Say (ibid, p.
86), the price of an average Negro slave was $400, and other annual expense was $100.
Several decades later, Jevons (1871, p. 182) referred to Negros as a lower race and savage,
and lamented about their purported laziness without, for but a moment, considering the massive
foul that slavery represented nor its likely affect on motivation. A couple decades prior, the term
dismal science turned up in a Carlyle (1849) article entitled Occasional Discourse on the
Negro Question, which was reprinted in an 1853 London pamphlet entitled, Occasional

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Discourse on the Nigger Question (Dixon, n.d.). In 1863, a prominent economist, Kingsley,
wrote that to tell me that [the negro] is [the whites] equal, is to outrage face - & the negro
himself knows it (Groenewegen, 2002).
Born out of the Scottish enlightenment period, Adam Smiths Wealth of Nations is
perhaps the most well-known dissertation in economics. Smith may presuppose homogeneity
among humans, but still likelier, Smith merely disregards other races while preaching from the
pulpit of British superiority. David Hume, one of the more influential minds of Smiths time,
explicated a prominent assumption on race, that the negroes, and in general all other species of
men (for there are four or five different kinds) to be naturally inferior to the whites (McCann,
2008). Taking into consideration corrupt ideals of colonial period, we can surmise that British
theories of private property rights were designed to justify Western usurpation of lands from
people considered to be of a different, lower species. Simultaneously, alternative economic
theories (e.g. Marxism) were suppressed as a matter of political and national security. Herein lies
an important clue if economics were a science, its fundamental tenets would not have to be
enforced with brutality.
Since the 1960s, at least, explicitly racist ideology has been discouraged in the
mainstream, but the fruits of economics racist past are still ripe for the picking. For example,
taking into consideration average annual inflation, the cost of minimum wage labor in Chinese
factories in 2015 was less than the cost of a slave in Says era (Tanielian, 2015, p. 34). In 2014,
90 of Harvard Business Reviews 100 Best Performing CEOs were white males. By early
2015, only there were only five African-American CEOs among Fortune 500 companies, and
only one female CEO. Between 1969 and 2014, among the 75 recipients of Nobel Prizes in
Economic, 72 were white males; one was a female; two of the three non-white males shared their

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prizes with white males (ibid, p. 65). Such facts make it difficult to completely rationalize the
idea that a total change of direction has occurred, or is even possible.
To a left-liberal of 1900, classical economics was a piece of party propaganda; it was the
cold, calculating and cruel sophistry of an avaricious class; it was the economics of Hard Times
Dr Gragrind; the economics of the Poor Law, the iron law of wages, and ruthless competition
(Coleman, 1996). Of course the status quo distribution [of wealth] has historically been one of
substantial inequality (Persky, 2004). These same issues have made their way to the forefront of
the political forum in 2016, when Senator Bernie Sanders has built his platform on the idea that it
is morally corrupt to support a system wherein the top 0.1 percent is worth as much as the
bottom 90 percent (Monaghan, 2014; Sanders, 2016). True, if economics were a science, these
constant conditions would be seen through centuries. However, the core principles of economics
are fundamentally different from naturally-occurring phenomena, such that economics cannot
qualify as a science per se.
Fatal Flaws of Contemporary Economics
Whereas humans cannot control gravity, or the reaction that occurs when chemicals are
introduced under specified conditions, the entire system of trade is defined and controlled by
human beings, many of whom have different ideas of wealth and value. Most people have heard
the old adage, one mans trash is another mans treasure. This type of idiom shows the
unpredictability of human cognition with respect to valuation. Through consistent observation
and experimentation, sciences create predictive models, something economics has not been able
to do (Barker, 2013). Boom-and-bust cycles and daily market volatility exemplify the
unpredictable nature of financial systems, which some of the brightest minds in the world

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attempt to figure out but simply cannot. Investing in stocks is often compared to gambling, in
contrast to scientific experiments, which are not a guessing game.
Because science yields predictable, reproducible results, science also generates consensus
among its participants, something utterly lacking in economics. Sciences, or moreover,
phenomena that are observable and understood by science, are not subject to the whims,
emotions, or supernatural beliefs of human beings. If science were a guiding force behind
economics, then policy would be fairly static, and such policy would progression more-or-less
linearly in one dimension through time as new discoveries were made, consensus would adapt,
and new facts would replace discarded ideas.
If science were a driving force behind economic policy, Ted Cruz would not have
endorsed a return to the gold standard because such a thing is quite literally impossible (Benko,
2016). Numerous other examples exist illustrating the confounds science brings to economics,
but perhaps none as prolific as the fact that current corporate and market economic systems rely
upon growth, and that such growth must persist indefinitely, when the sciences clearly
demonstrate that unlimited economic growth is a myth (de Sabata, 1995; Murphy, 2011). In the
earths system of finite natural resources, consumption at any rate cannot occur over an infinite
time period, yet economists have scarcely recognized the fault in their logic.
At its core, economics has always been and will always be manipulated by people, who
set the prices for goods and services. The ideal perspective [of good science] is that of
objectivity, said Steele (2004). One does not have to be a bleeding heart liberal to recognize the
lack of objectivity in aggregate economies, given inconsistencies like the fact that women in the
United States are paid 78 cents for every dollar paid to males working the same jobs (NWLC,

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2016). Neoclassical economics presupposes that people make rational decisions (Barker, 2013)
but fails to respond to exceptions. In the end, it is those exceptions which show economics is not
actually a science.
The so-called law of demand states that as price rises, consumer demand will decrease.
In science, a law has no known exceptions. In contrast, Giffen goods and Veblen goods are
known exceptions to the law of demand. Consumer behavior was observed to have contradicted
economic model with potatoes and rice, in Ireland and China, respectively (Investopedia, 2016).
Yet, economists maintain that the law of demand is a law, which it is not by formal scientific
standards.
Use of Mathematics Does Not Imply Science
Music can be studied with mathematics. Sound waves can be recorded and analyzed
using technology. Harmonic wave functions can be designed, graphed, and understood using
physics. But, simply because the tone, pitch, reverb and other properties of a clarinets sound can
be understood by a scientist does not mean the person playing the clarinet is a scientist, or that
musicians are doing science. Art and science, while not mutually exclusive, are independent.
Likewise, painters and other graphical artists utilize geometry in their work. A Pope once
desired to hire a fresco artist, and sent a messenger to an artist, Giotto, asking him to submit a
competitive sample of his drawing capability. Giotto drew a mere perfect circle, without the aid
of a compass, and sent it back to the Pope, who saw Giottos ability surpassed those of other
competitors (Korenblat, 2007). Giottos circle would have satisfied mathematicians, who could
have studied its perfection using simple geometry, but that in itself did not make Giotto a
scientist, nor his drawing a work of science.

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In a similar fashion, price elasticity of demand can be calculated mathematically by the

formula,

%Q
%P , where Q is quantity demanded and P is price. This is merely a descriptive

statistic, no more scientific than an artist calculating the volume of plaster needed to sculpt a
bust. Oddly, it may seem obvious that such a simple algebraic equation as price elasticity is not
automatically scientific just because it uses math, but when the complexity of mathematics is
increased to something like the Black-Scholes model for derivative investments, then people
assume science must be involved.
In 1997, Stanfords Myron Scholes and Harvards Robert Merton won a Nobel Prize in
Economics for their work on the model, which was seen as a major breakthrough in scientific
legitimization of derivatives trading. Nobel Media (2016) stated the Black-Scholes formula for a
European call option is,

C=SN ( d ) Lert N (d t ) , where

d=

ln

S
2
+ r+
t
L
2
t

( )

While Nobel displayed the algebraic formula on its web page, other experts in the field
tend to rely on partial differential equations to solve the Black-Scholes terminal value problem
for the value V(S,t) of a European call option on a security with price S at time t:
V 1 2 2 2 V
V
+ S
+rS
rV =0
2
t 2
S
S

with V ( 0, t )=0, V ( S , t ) S as S V (S ,T )=max( S K , 0)

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Indeed, such beautiful mathematics does add a splash of scientific discovery to the
subject (Dunbar, 2014), but for this type of idea to be scientifically valid, it cannot simply be
introduced by some economists and thereafter be considered law; it has to stand up to scrutiny,
testing, and counter-argument. The financial sector called the Black-Scholes equation the Midas
Formula. It was used to turn derivatives into commodities, which enabled epic economic
growth. By 2007, the global financial system was trading derivatives at one quadrillion dollars
per year ten times the total worth of all product made in the century prior (Stewart, 2012).
Black-Scholes was so successful that other mathematicians created their own models on an ad
hoc basis for banks like Goldman Sachs and Lehman Brothers two notorious banks which
helped create a global financial crisis.
The Black-Scholes equation and others like it assume the volatility of an asset was
constant over the lifetime of the option, which is simply not true for cases involving debt-based
securities. Other underlying assumptions include constant risk-free interest rates, continuous
trading of any number or portions of stocks, cost-free trading, an absence of arbitrage in the
market place, that stock prices follow geometric Brownian motion, and that underlying
securities do not pay dividends (Zvi, Kane, & Marcus, 2008; Haugh, 2009). These assumptions
clearly do not follow reality, yet the financial system applied these models in a virtually
unfettered manner, leading eventually to market crashes, which the models clearly fail to predict.
In science, there are theories and ideas which seem to work only in space. Galileos
leaning tower of Pisa experiment showed that objects of different mass fall at different rates,
which Galileo correctly reasoned was due to wind resistance, although in his time it may have

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seemed ridiculous to believe in the paper-based logic of physics (Zeleny, 2016). Only later did
humans create vacuums and travel into space, where physics seems to work better. The only
problem with using the analogy of physics with market economics is that there is no place where
interest rates are constant, and partial stocks can be traded, and where arbitrage is absent, and
where the volatility of an investment is constant. These assumptions are simply untrue within the
framework of economics, which is created by humans and exists only on earth. Regardless of
how enlightening paper-based abstractions may feel, if they rely upon impossible assumptions,
they cannot be implemented as science.
Since the financial crises of the mid-2000s, critics of Wall Street and greedy investment
bankers have consistently compared the markets to casino gaming. Lewis (2011) The Big Short
depicted a financial industry addicted to making unsafe bets, and ultimately dragging the entire
world to the brink of economic collapse. These gamblers, whether at a dingy casino or a
Manhattan sky rise, make calculations based upon known values and use intuition, inferences,
insider tips, word-of-mouth, and hunches to deal with unknowns, which are constant in the
human world. Games of chance can be studied with mathematics, like economic activity, but that
does not mean craps is a science just because dice frequently show up in math textbooks. Never
can we imagine a day in which the World Series of Poker is considered a science convention. So,
it follows that the current paradigm of financial market economics should also not be considered
a scientific system.
Conclusion
Joan Robinson (1962) said, Economics itself [as a discipline] has always been partly a
vehicle for the ruling ideology of each period as well as partly a method of scientific

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investigation. Her quote encapsulates why the prefix pseudo should be added to the science of
economics. Math is used to create economic models, which are push-marketed into the
mainstream through academic institutions and government agencies (Barker, 2013). Those ad
hoc models are generated through selection, exclusion, and manipulation of data, which is bad
science. Merriam-Webster (2016b) defines dismal as very bad or poor. Therefore, it seems
Carlyle was accurate in labeling economics the dismal science. Economics is simply not held to
the higher standards of sciences; its methods do not pay respect to the rigors of the sciences. As
such, economics should not be considered a science.

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