Re: Economics is like philosophy
No economics is a set of tools to look at various problems. Some are better and more well understood than others. Unfortunately quite a lot of them, particularly in macroeconomics are too controversial to be of precise use, but often give at least a guide, or rule-of-thumb.
So for example, we know that if you put up the price of a good, demand will drop. Except in a few specific cases like Giffen goods (staple food in a famine). We also know this relationship is defined by the price elasticity of that good. Which tells us how strong the relationship is between price and demand. So food is quite price inelastic, you'll eat less if it costs more, but not too much less - as you're more likely to sacrifice other things from your budget first.
But then the devil's in the detail. Do you know your price elasticity? If prices rise, we also know that supply will rise to try and cash in on the lovely extra moolah now on offer. But we don't know by how much, as you may have barriers to entry to the market (regulations etc).
We also know that if you raise taxes too high, they start collecting less money. The good old Laffer curve. The problem is, no-one's quite sure what point on the Laffer curve they're ever at - or exactly what shape it is. So it's not very helpful to set specific tax rates. It can sometimes mean that you can lower a tax, and raise more income. But it's still nice to know the pitfalls when setting policy, and you may of course be deliberately setting a tax rate to discourage something, rather than to maximise revenue. In which case you may not care.
As Keynes said, economics is very good at telling you what you did wrong in the past, but not so good at forecasting the future.
On the other hand, it's the best we've got. And it's better to know more than less. And there are some obvious lessons to take. So governments should spend in recessions to help keep the economy on an even keel (and stop the unemployed starving). But there's another side to this equation, that in booms governments need to save. They need to spend a bit less than they take in tax, in order to stop the economy overheating, and so they're in a position to safely borrow lots in the bust. That's the hard bit of Keynesianism. The bit no-one ever remembers. Like the saying there are no atheists in foxholes, everyone's suddenly a Keynsian when the recession comes. Even when they were advocating massive over-spending in the boom *cough* Ed Balls *cough*.
Oh yes, another rule we don't understand, can't accurately predict, but know is roughtly true. There'll be a recession every ten years or so. We don't really know why capitalism has to be broken in this fundamental way, but it seems to be unfixable. Put it down to people being rubbish. Free market economies work on the level of the average. On average everyone gets richer over time, but that doesn't account for the people who don't - or the odd ten year blip of falling wages. So in Tim's example rare earth prices are back to roughly where they were before, but not without several companies going pop first, and the shareholders of others losing their investment. It's a messy old system.
A bit like climate change research, we only have really decent statistics starting in the 20th century. And even there, the quality is variable. And we don't have the ability to do controlled experiments. It's also bloody hard to try and forecast the future, because the accurate stats on our current economies usually take about 6 months to arrive. And even then we don't know all the inputs and outputs. But maybe as we build up a larger history of good quality data we can try and build better models, and we'll have more past scenarios to study, which is the closest we're ever going to get to experiments.