Questions such as what has driven real wage growth among certain sectors of the economy are routinely asked within labor economics, and fairly robust empirical methods give reasonable and consistent answers. The same thing has occurred with human capital attainment. Things like the “mincer equation,” have been incredibly robust benchmarks for individual wages across various countries and time periods, almost stupidly so in explaining about the same variance, and having routinely approximated coefficient estimates. Yes, I’m aware of the Austrian critiques against such extrapolation, but used descriptively they do offer us a better insight into how things like education attainment compared to raw skill growth tends to affect life time earnings of workers, and other extrapolated knowledge.
A lot of tax policy work has slowly come to a larger consensus as empirical methods have improved in how to approach discontinuities.. Same thing goes among estimating how various health care policies can impact inter-hospital level of care. The main factor here is that these studies focus on smaller areas than are typically mentioned in the WSJ or reported by groups such as Macroeconomic Advisors.
This is a perfect illustration of the difference between economic theory and economic history.
Let’s say we figure out “what has driven real wage growth” using empirical methods. After estimating our coefficients with backfitting, we can forecast future wage growth using our calibrated model. Bam! It predicts extraordinarily well, given the crude quality of our data collection.
OK great. Now: Does anybody think we have discovered a true economic law in the same way that physicists think that there are actual laws governing the behavior of matter?
I hope not. No matter how much “experience has confirmed” an empirical regularity in the social sciences, people still have free will (at least operationally, if we’re doing a social science rather than looking at them as collections of atoms) and so those forecasting models could go out the window tomorrow.
In contrast, if I logically deduce that, “The purchasing power of money will be lower, other things equal, when the stock of money increases,” then that is a genuine law of economics. If you allow me to define the terms etc. in such a way that that proposition is true today, then it will necessarily be true for all time and all cultures.
Last point: Ultimately, we really don’t even have any good reason to expect that Nature herself lacks free will, and might upset what we took to be her “laws” tomorrow. This is of course Hume’s famous problem of induction. But the physicists and chemists can shrug at the philosophers and say, “You go ahead and argue about why it works, but it clearly does.”
In contrast, the economists–certainly the macroeconomists–have no business whatsoever telling the rest of society, “You go ahead and argue about why we can predict so well in our field, but clearly we can.”