Thursday, December 26, 2013

Ludwig von Mises on Mathematical Economics

I have received several emails commenting on my post,  OUTRAGEOUS Twisting Ludwig von Mises Beyond Recognition.

One emailer argues that the great Austrian economist Ludwig von Mises did in fact champion the study of mathematical economics. The emailer writes:
The quote from Mises  [that Boettke uses] was directed by Mises at a teenage Lawrence Moss who asked Mises what it takes to be an economist. Mises said, you need to be a master mathematician, historian, natural sciences, etc., etc.. Moss said that was too hard, Mises replied "Nobody asked you to be an economist."
This is true, but the telling of the story in this manner leaves out key information. Like Boettke's quote, it does nothing to inform as to Mises true view of mathematical economics. Here's how Mises tells the Moss story:
He who wants to achieve anything in praxeology must be conversant with mathematics, physics, biology, history, and jurisprudence, lest he confuse the tasks and the methods of the theory of human action with the tasks and the methods of any of these other branches of knowledge. What was wrong with the various Historical Schools of economics was first of all that their adepts were merely dilettantes in the field of history. No competent mathematician can fail to see through the fundamental fallacies of all varieties of what is called mathematical economics and especially of econometrics. No biologist was ever fooled by the rather amateurish organicism of such authors as Paul de Lilienfeld.

When I once expressed this opinion in a lecture, a young man in the audience objected. "You are asking too much of an economist," he observed; "nobody can force me to employ my time in studying all these sciences." My answer was: "Nobody asks or forces you to become an economist."
My point here is that to say Mises was in favor of studying mathematics is very misleading. It would give one the impression that Mises was in favor of studying mathematics because it is important to the field of economics. This is the default take away that almost anyone would make when hearing that someone thinks it is important to study anything. Thus, it is important to detail why Mises considered the study of mathematics important. Mises was in favor of studying mathematics so that an economist could understand the how and why of mathematical economics and how it is a flawed method. Mises, when he recounts the Moss story, makes this clear. Boettke, when he quotes Mises, fails to do this.

Also note, the emailer claims that Mises said that one needs to be a master in mathematics. I think it is important to note that Mises himself did not say exactly this. In his recounting of the Moss story, Mises says merely that an economist needs to be "conversant" with mathematics. I would argue that this is far different from being a master.

Consider this example. Suppose that I know nothing about fire fighters and want to be conversant in how they fight fires. I talk to them and even go out with them as they battle a house fire. I learn that they battle fires, mostly, with water. This now makes me a bit conversant with how fires are fought. It doesn't make me a master. I don't know anything about fire hoses, the best angles from which to fight a fire etc. but I do know the essence of fire fighting: water. If for some reason, I find a problem with fire fighting because of water use, I am conversant enough to argue that firefighters shouldn't use water.

In the same way, if I am familiar enough with mathematical economics to understand how mathematical economists use empirical  data in their work, say with regression analysis, then I am in a strong enough position to critique mathematical economics use of empirical data, if I consider the empirical search for economic principles faulty. Of course, in the case of the study of fire fighting methods and the case of mathematical economics, the more detailed my understanding, the potential for a more detailed critique increases. That said, conversant is not the same thing as being a master.

To move on and make clear about my earlier post, my problems with Boettke's FEE column centers on  more than what I consider his misleading Mises quote. For example, Boettke writes in his column:
mathematical modeling and statistical testing is the scientific language in which professional economists speak
Boettke writes this without indicating whether he has any objection to "statistical testing." Statistical testing flies in the face of Austrian methodology.  He just doesn't give a clear statement on his views on this. It would be valuable to know: Is he an Austrian on this methodological point or not?  His dangling on this issue is sure to leave any of those reading the column confused.

And, I have  a problem when he eventually expresses some concerns about the "big data" quote of FT's Wendy Carlin that he cites. In the same paragraph that he expresses concerns, he approvingly introduces Vernon Smith and his "lab experiments," which is certainly also to a degree about data collection and the "proving" of economic theories via empirical study, which the leading Austrians, Menger, Mises and Rothbard would have surely objected to.

Even Smith seems to get that his view is different from the Austrian view. He once wrote
Mises’ views on experimental methods reflect the methodological outlook that was universal in the profession 50 years ago—namely that economics is necessarily a nonexperimental science:
Boettke in no way is promoting an Austrian view when he mentions Smith and approvingly links him, correctly, to "experimental economics." In other words, the FEE column is far from an Austrian perspective. It is a jumble.


  1. Thanks Bob

    As someone who has read Human Action, I find it nauseating that something so fundamental to LVM's life's work could be so misrepresented. It is sad that such antithetical nonsense even needs to be rebutted.

    Hopefully, the idea that Mises approved of anything other than praxeology for the study of economics has now been laid to rest. Anyone who doesn't think so should read Human Action (Hint:start with the title and don't skip over the lengthy discussion of why praxeology is the method of economics).


  2. Boettke may be correct in saying that one must become proficient in mathematical modeling and statistical testing, because in today's world, one cannot become a "professional" economist, namely get paid for it, unless one caters to the flawed methodology of econometrics.

    To this, I believe Mises would say, "Nobody asks or forces you to become a PROFESSIONAL economist, especially if you must adher to a flawed orthodoxy to do so."

    Both Mises and Rothbard were passed over for prestigious positions because they refused to make the compromise that Boettke seems to advocate in order to become "professional" economists, who are well-paid for devising complex mathematical models that justify, through obscurity, the goals of their Statist paymasters.

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