## Debunking mathematical economics

3 November, 2018 at 15:36 | Posted in Economics | 3 CommentsThe belief in the power and necessity of formalizing economic theory mathematically has thus obliterated the distinction between cognitively perceiving and understanding concepts from different domains and mapping them into each other. Whether the age-old problem of the equality between supply and demand should be mathematically formalized as a system of inequalities or equalities is not something that should be decided by mathematical knowledge or convenience. Surely it would be considered absurd, bordering on the insane, if a surgical procedure was implemented because a tool for its implementation was devised by a medical doctor who knew and believed in topological fixed-point theorems? Yet, weighty propositions about policy are decided on the basis of formalizations based on ignorance and belief in the veracity of one kind of one-dimensional mathematics.

Indeed. As social researchers, we should never equate science with mathematics. All science entail human judgement, and using mathematical models do not relieve us of that necessity. They are no substitutes for doing real science.

‘Mathiness’ masquerading as science is often used by mainstream economists to hide the problematic character of the assumptions used in their theories and models. Without strong evidence, all kinds of absurd claims and nonsense may pretend to be science. Using math can never be a substitute for thinking. As one of this year’s ‘Nobel laureates’ has it in his showdown with ‘post-real’ economics:

Math cannot establish the truth value of a fact. Never has. Never will.

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If making “the distinction between cognitively perceiving and understanding concepts from different domains and mapping them into each other” is important, then might not some kind of relatively objective logic be useful, and in so far as the concepts involve mathematical structures (such as numbers), might not mathematics be useful?

It seems to me that the problem is not the use of mathematics as such, but the mis-use of inappropriate models.

Comment by Dave Marsay— 3 November, 2018 #

Linear algebra gives you tools to represent every possible future market state, then use optimization techniques (solving Ax=b) to guarantee you a minimum payout no matter what happens. Finance uses math to strip out risk. Traditional economics has not yet incorporated such math in its models …

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See http://nymag.com/news/business/55687/index2.html

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“Working with another programmer, I wrote a new mortgage-backed system that enabled investors to choose the specific combinations of yield and risk that they wanted by slicing and dicing bonds to create new bonds. It was endlessly versatile and flexible. It was the proverbial money tree.”

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Math allows traders to set their own prices, without worrying about quaint old ideas of supply and demand …

Comment by Robert Mitchell— 5 November, 2018 #

“John Maynard Keynes once wrote that if we have all the facts before us, we shall have enough simultaneous equations to give us a determinate result At first this description of the essence of mathematical economics appears most profound. But a second glance reveals that what Keynes is saying is, that if we already know the future we can predict it! If only a snake had arms it could do push-ups!” Lawrence W. Reed, och grattis Lars.Hoppas du har en go födelsedag,unge man!

Comment by Jan Milch— 5 November, 2018 #