Krugman vs. Galbraith on math and models

21 Aug, 2013 at 18:06 | Posted in Economics, Theory of Science & Methodology | 10 Comments

James K. Galbraith

Krugman’s main point is that he represents the “nerds” of economics, whereas I and the distinguished writer Robert Kuttner are “literati,” who would like the profession to be less mathematical than it is. Leaving Kuttner to speak for himself, this view also totally misrepresents not only my position but also Paul Krugman’s own professional one.

This may come as a surprise to outsiders, but Krugman is not a mathematical theorist (and I have heard him admit this, to a knowing audience). Krugman’s mathematics are not deep, and he has no interest in complicated manipulations of data. He owes his fame, instead, to an exceptional grace and lucidity of formal presentation. With these gifts, Paul has expanded the range of neoclassical economics in several notable directions, especially international trade theory. Krugman’s professional work is mathematically literate, of course. The point is that it is also literate, and, for many economists, that is its appeal.

My own work is mathematical when it needs to be …

So if the issues between Krugman and myself are neither hermeneutic nor mathematic, what are they? The actual issues are philosophical and theoretical.

Paul’s worldview rests on the belief that useful implications for important questions of public policy can be derived, essentially from first principles, with the help of a well-structured logic. Well-structured deduction from metaphysical first principles is the Krugman forte.

I don’t accept that much of use can be learned about policy in this way. When the world deviates from the principles, as it usually does, the simple lessons go astray. This is not a complaint against math. It is a complaint against indiscriminate application of the deductive method, sometimes called the Ricardian vice, to problems of human action. Mine is an old gripe against much of what professional economists do; not against science but against scientism, against the pretense of science. To combat it, I spend my research time wrestling with real-world data, and I spend much of my writing time warring against the policy ideas of aggressive, ahistorical deductivists …

In the final analysis, Krugman’s argument is that there is a simple distinction between the “serious” economists–who agree with him–and the “critics,” who are, by definition, not serious. It is true, of course, that economic-policy discussions are magnets for cranks. But from this it does not follow, and is not in fact true, that all “serious” economists hold to some single position. It is even more absurd to suppose that one gains access to this wisdom by passing an exam in algebra. In this respect, Krugman’s argument is so shallow, so actually illogical (a fallacy of induction, in this case), that it is evidently aimed at rubes. I hope not many will be taken in.

Paul Krugman


Economics is at least partly about quantities and their relationships; so you can’t make sense of it unless you are willing to do some arithmetic and even some algebra to make sure that the stories you tell hang together–and that they are consistent with the evidence. This doesn’t sound like much, but experience shows that there are many influential intellectuals who are prepared to make sweeping pronouncements on economics without doing the arithmetic …

Galbraith, like many critics of economics, seems to believe in the following syllogism:

1) Economists disagree about some important issues, and some economists with impeccable credentials say silly things.

2) Therefore, there is no need for a smart individual to brush up on economics–say by reading an undergraduate textbook–before making pronouncements on the subject.

Although Galbraith systematically exaggerates and misrepresents the actual disagreements, 1) is obviously true about economics–and about medicine, and physics, and law, and any other discipline you choose to name. Did you know that astronomers cannot agree on the age of the universe, and that the current best estimates suggest that the oldest stars are older than the universe in which they shine? So maybe Copernicus was wrong!

The point is that in each of these disciplines, we all understand that while there are major disagreements about some questions, there is also a large area on which the experts do agree, and in which their expertise is real …

Because of this attitude, most of the criticism economists face is not over issues where there is legitimate disagreement. Instead, the heavy majority of the challenges are simply wrong on the arithmetic. That is, the doctrines asserted either do not add up, can be shown to be flatly untrue using readily available data, or can be shown by simple calculations to involve effects much too small to bear the weight being placed on them …

Now we all make mistakes. But the peculiar thing here is that in each of these cases, the proponents imagine themselves to have achieved a higher level of understanding, to have transcended the narrowness of conventional economics. Somebody needs to point out to them and to their audiences that, on the contrary, they are simply misunderstanding basic arithmetic.

Post Keynesian Archive

(h/t Jan Milch)

Added (GMT 20:20): And, coincidentally, Krugman has a post on – yes, math – on his blog today, now — 17 years later — writing:

What is true is that all too many economists have lost sight of this purpose; they treat their models as The Truth, and/or judge each others’ work by how hard the math is. It sounds as if Smith was taught macro by people like that. And there are a lot of people in macro, some of them fairly prominent, who are what my old teacher Rudi Dornbusch used to call “fearful plumbers” — people who can push equations around, but have no sense of what they mean, and as a result say quite remarkably stupid things when confronted with real-world economic issues.

With age comes humility and wisdom …