Mathematical slavery

5 Aug, 2020 at 14:07 | Posted in Economics | 1 Comment

cartoonNone of this is an argument in favor of taking a road along which there is less rigorous thinking. Our problem is much more that we have developed our models using certain mathematical techniques and that we have become slaves to those techniques. It is surely this more than anything else that has led us to persist with a model that, to any outsider, seems such a poor description of what actually happens in markets. The real world is one in which various market forms coexist, where different prices for goods are observed, and where the individuals who participate have only very local information. The appropriate notion of demand in such a world is certainly not close to the definition that we find in general equilibrium theory, but this does not make it any less interesting to analyze. The only drawback is that we may have a lot more intellectual climbing to do.

Alan Kirman

1 Comment

  1. The Arrow-DeBreu model of general equilibrium abstracts away from pervasive uncertainty and real-time. The actual, institutional political economy has many adaptations to uncertainty and learning, which are not anticipated in the imaginary of that theory.
    One difference readily apparent to an observer between the ideal theory and the actual political economy is that the actual political economy has very few actual markets. Kirman seems to want to say as much, but never quite does it.
    Instead he makes a meta-theoretical point. The problem is not that economists are interested in the wrong techniques. The problem is that so many economists are disinterested in the actual economy.

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