This column by Don Boudreaux is primarily about the minimum wage. I find this excerpt to be highly relevant:
Empirical research in economics is notoriously difficult because wages, prices, unemployment rates, product qualities, and all other data of the social sciences are, as Friedrich Hayek said, "complex phenomena." Having so very much constantly going on in the real world, having no laboratory in which reliably to isolate more than a handful of these phenomena at any one time, and unable to read directly the minds of the many persons whose perceptions and choices combine to generate social outcomes, empirical researchers can easily overlook or misread important variables.
The data problems can be worked on and the theory can be grappled with as well. Ultimately, this problem points to the appropriateness of less ambitious objectives in the realm of social science.
This situation distinguishes the social sciences from the physical sciences in two notable ways. First, a higher proportion of empirical research in the social sciences is subject to legitimate -- oftentimes irresolvable -- dispute. Second, as a consequence, in the social sciences theoretical considerations inevitably play a larger role in navigating around these disputes and in forming judgments about desirable public policies.
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Don Boudreaux also wrote in that article the following: "we are justified in being extraordinarily skeptical of empirical findings that are inconsistent with widely accepted theoretical foundations."
I have to say that this statement bothers me very much. I can see being skeptical if the theory is relatively straight-forward, has been supported by oodles of empirical evidence, and the inconsistency is an isolated case. And, it turns out, all of these are the case regarding the laws of supply and demand versus the minimum wage.
But in the general case, I tend to put a lot of weight on empirical evidence. Theories, especially in economics, especially when there are a lot of variables, can be very fragile and are often disproven by real world evidence. Remember all the theories in the early part of last century supporting the superiority of collectivism?
When economic theories intersect reality, it's often not a pretty sight.
Of course, I'm also acutely aware of the issues of measuring anything in the social sciences. It's best to be skeptical on all sides.
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