Monday, July 13, 2015

The Increasing Mathematization of Economics

Or to put it another way, mainstream economists have more of an inferiority complex than ever. They attempt to mimic the physical sciences for no good reason.

As Ludwig von Mises put it:
As a method of economic analysis econometrics is a childish play with figures that does not contribute anything to the elucidation of the problems of economic reality.-The Ultimate Foundation of Economic Science p. 63

As there are in the field of social affairs no constant relations between magnitudes, no measurement is possible and economics can never become quantitative.-The Theory of Money and Credit p. 460

Every quantity that we can observe is a historical event, a fact which cannot be fully described without specifying the time and geographical point. The econometrician is unable to disprove this fact, which cuts the ground from under his reasoning. He cannot help admitting that there are no behavior constants.-Theory and History p. 10 s

The specific experience with which economics and economic statistics are concerned always refers to the past. It is history, and as such does not provide knowledge about a regularity that will manifest itself also in the future.-Epistemological Problems of Economics.
And as Friedrich Hayek said in his Nobel lecture:
 It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences – an attempt which in our field may lead to outright error.  It is an approach which has come to be described as the “scientistic” attitude – an attitude which, as I defined it some thirty years ago, "is decidedly unscientific in the true sense of the word, since it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed."



  1. Does the same "publish or perish" mentality exist in the minds of many/most mainstream economists as it does in those in the physical sciences? If so, this may explain, perhaps even partly, why.

  2. When presented with facts a mythical French economist said “Well, yes, but is it true in theory?”

    Or to paraphrase Adam Smith: “The world is more complex than a [model] allows it to be.“

  3. Intellectuals love this as it makes them feel intellectually superior to average Joes.

    More importantly it furthers the notion that they can somehow "manage" an economy in some precise way ............ if given a chance!

    Thankfully we know better.

    1. Nice to know that there's a true libertarian on one (or two) of my favorite islands!

  4. “Our choicest plans have fallen through, our airiest castles tumbled over, because of lines we neatly drew and later neatly stumbled over.”
    — Piet Hein GROOKS

    "An apt symbol of this stumbling over neatly drawn lines is Einstein’s assertion that time is an illusion. The simplified equations are solved; the simplifying assumptions are forgotten; and people begin to believe nature is as simple as the math. Because the idealized deductions work “close enough” in certain carefully-selected situations, they’re believed to be more real than reality. They break out of their domains of validity and hold us hostage to their degraded logic.

    Those simple, universal, time-symmetric laws have no place for chance, no place for choice, no place for the emergent, higher levels of order and intelligibility we see filling the real world. Outside its domain of validity, that simplified and reduced world of ideal equations has turned out to be a prison of determinism, an exile of impoverishment. We have become captives of our own simplifying assumptions."
    Mel Acheson, Captives of Simplifying Assumptions -