Dear Sylantyev, it is true that a generalized and mainstreamed practice of science was - and still is - as trial-and-error. No doubt that such an approach has provided solid grounds for the advancement of knowledge. Trial-and-error, however, has become a more refined approach thanks to modeling and simulation. Thanks particularly to simulation trial-and-error has radically changed in science in general - and in fields such as economics, in particular.

This said, monetary policy is a discipline that can walk through simulation so that it can proven undesirable decisions and actions. In Latin America we know two catastrophic cases of such real trial-and-error: the "corralito" effect in Argentina ("Litlle corral"), and the "tequila effect" in Mexico.

In economics, as you know, there is this new fundamental methodology, namely "experimental economics" - whence, yes: experimental monetary policies.

Would you agree with this?

Monetary policy is already taught in macroeconomics courses of U.S. universities. Prior to inquiring whether monetary policy is a science, we must ask the more radical question whether economics itself is a science. It has been classified by university curricula as a social science. Therefore, using this designation, we could comprehend monetary policy as an applied science of the social science that is economics. It could be objected that any discipline using trial and error is not classifiable as a science. This is radically false, because every hard science using experiments relies on trial and error.

Dear Sylantyev, it is true that a generalized and mainstreamed practice of science was - and still is - as trial-and-error. No doubt that such an approach has provided solid grounds for the advancement of knowledge. Trial-and-error, however, has become a more refined approach thanks to modeling and simulation. Thanks particularly to simulation trial-and-error has radically changed in science in general - and in fields such as economics, in particular.

This said, monetary policy is a discipline that can walk through simulation so that it can proven undesirable decisions and actions. In Latin America we know two catastrophic cases of such real trial-and-error: the "corralito" effect in Argentina ("Litlle corral"), and the "tequila effect" in Mexico.

In economics, as you know, there is this new fundamental methodology, namely "experimental economics" - whence, yes: experimental monetary policies.

Would you agree with this?

I am a chemist and hence my answer may not be as good as the answers which come from those specialized in economics.

There are 2 issues to be considered: the growth of wealth & the distribution of wealth.

The growth of wealth is a full-fledged universal science which may be subjected to experimenting (trial & error) such as trying to increase the wealth in Canada by utilizing the tar sands in Alberta. It may work & it may not work.

As for the distribution of wealth, I think that there is a need for application of a just system in which the existing formula of (the rich gets richer & the poor gets poorer) is abandoned. The "establishment" ought not be allowed to experimentation of monetary policies after the adoption of a policy by the best brains of a certain nation. Trial & error will cause more "bubbles", destabilization, and probably a collapse. Therefore, this part is not a science.

My personal view is that it is not a brach of science per se. As I am not an expert of economics, I will look at it from the angle of science.

Apart from the trail-and-error approach, one major feature of science is its objectivity. If we apply the same amount of force to the same amount of mass in the same direction, whoever does it, the sam amount of acceperation results. Will we get the policy by different people? I doubt it.

Another feature of science is its repeatability (could be thought as an aspect of objectivity). If test done on one occation would largely produce the same result on a nominally identical occasion.

Having said that, the study of monetary policy is now part of social science. So many methods in science have been introduced and even developed. So it now has strong features of a branch of science but it is not still not a proper branch of science. This is not degrading its usefulness but it is the nature of this subject.

From my point of view monetary policy is science.

and this is a special branch.

I find a very comprehensive and convincing reply from @Carlos Eduardo Maldonado. I endorse it.

If we take "trial and error" as one of the attributes to qualify as a 'science' there is hardly any walk of knowledge under the Sun that would fail to qualify. Our spiritual explorations, process of forming life long friends, historical studies,..well..just about everything is one way or other "trial and error" only. We would not accept these as "science", though some gurus are adept at teaching us the science of religion!!

Monetary policy, as Nelson says above, could be treated as an applied science of economics. Political Economists the world over (Kaufmann, North, Feng...) have, through their extensive exploration of the relationship between governance and growth have come to the conclusion that economic growth is hugely influenced by factors such as political stability, consistency in policy, absence of violence, etc - factors that are not exactly quantifiable. We also understand that monetary policy of a country is an attempt by the polity to set parameters to engines of economic growth by carefully (to the best of their ability and with assistance from economists) balancing the felt needs of the people and actual fiscal realities. The monetary policy therefore is subject to vagaries of politics. While the fiscal parameters serving as the foundation of the monetary policy may be drawn from definable-predictable factors, the end results set for the policy challenge quantification and definition.

To qualify as science predictability of its foundational parameters is important. I am not sure if Monetary Policy can stand that test.

Trial and error is unavoidable in any science, and monetary policy cannot be an exception.

Money are a means for evaluation, exchange, measurement, redistribution. Virtually all social processes involve money. If society is evolving, money have to evolve, there is no other way. There is no error free evolution process.

Personally i would suggest teaching students how to interpret the changes in monetary policy and use them to their benefits. There is no point to teach them how to create a monetary policy, as the chances to do that are one in millions.

This question has recently been addressed in great details by William R. White. He concludes on page 37:

"Finally, recognizing both past uncertainties and future uncertainties about how “best” to conduct monetary policy, we should not rely excessively on the use of monetary policies to cure all ills. Monetary policy remains more art than science and the artists remain all too human and fallible. This final conclusion, that we need to widen the array of policy tools directed to economic stabilization, clearly applies to the prevention or moderation of the next crisis. It applies, however, equally or even more strongly to the management of the current one."

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Is Monetary Policy a Science?

The interaction of Theory and Practice Over the Last 50 Years

By William R. White, Federal Reserve Bank of Dallas

Globalization and Monetary policy institute

Working paper number 155, September 2013

http://www.dallasfed.org/assets/documents/institute/wpapers/2013/0155.pdf

"Monetary policy remains more art than science and the artists remain all too human and fallible." Thus sayeth the expert William R. White. And I ask, Are scientists inhuman and infallible? Cannot art be grounded on infallible rules? (e.g., the art of writing a classical sonnet, or the art of writing a classical sonata). On the other hand, didn´t science give birth to the indeterminacy principle? No, the art/science distinction is too fluid. Art and science are NOT mutually exclusive, and the best proof of that Is the art or science of healing, medicine. Do not tell me, therefore, that monetary policy is an "art" and therefore cannot be a "science." Monetary policy could well be construed as the art or science of insuring fiscal health.

@Nelson

You need to read the paper first to appreciate the conclusion. The conclusion must be taken in the context of the paper. I urge you to read the paper first may be then you will have a better understanding of his conclusion. If you have already read his paper then your disagreement is understandable, as this is a topic where I think there is no consensus.

Agreed, Issam. I will study the paper more carefully.

I think economists who deal with monetary policy not scientists, but a real "shamans".

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Science's monetary policy is more the result of the suggestion that their actions than induce a relationship between cause and effect.

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As a "shaman" the central banks of developed countries handle with empirical perceptions (and magic) of the "market" and with the assistance of "helpers shamans" (directors of financial conglomerates) that induce herd behavior of the rest of the market.

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Let's illustrate best: If the Federal Reserve rises and falls the interest rate of 0.25%pa no need to be an economist to see that the real economy would not be affected at all with this decrease or increase the interest rate, but at the same time that this rate is changed by 0.25% massive volumes of floating currency and no actual destination migrate in a given direction, usually up to a certain point in the direction that the FED wanted to indicate. That is, the Fed Chairman is a real magic and quickly billions of dollars that had no representation in the real economy migrate in a given direction.

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These movements of the Fed and other central banks of the richest countries, has a "magic" action to correct the distortion for a specified period, but this distortion product of inadequate fiscal policy is not corrected at its source. If the interest rate rises or falls negligible values, despite all the migration of currency for exchange or for government securities, is not why China will stop growing or European and American industries will gain ability to compete with countries where the vitality is based on a low-cost production equipment and better quality every year.

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The "Shamans of the economy" replaced the real economists for a long time, and perhaps the entire economy of the western world is based on the credibility of magic that might end up like the story of the Wizard of Oz.

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I'm not an economist or a financial, may be some scientific tools are needed for regulation purpose (i prefer the term rules/policy than statistical error trials more close to labs milieu than to natural one).

Economy is a dynamic human based activity, mostly related to the geographical and natural resources availability of each region of the earth; Money or any financial means is a tool for markets exchanges and functioning. So when this tool becomes the 'virtual' controlling rule of markets instead of the economy itself, which is run by the offer and demand rule from products, services, innovation, technology, industry, etc...ie by enterprises themselves, the equation is totally biased.

I think that enterprise management and marketing science, is more realistic and close to the dynamic behavior of the economy than any trial error economics or financial science

I agree with Nelson and Fairouz for their comments too. with my best regards to all of the above sharing.