Economics is About Reality, Not about Economics

by Don Boudreaux on March 26, 2009

in Education

The world would be a better place if more economics professors were like this one.

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Manfred March 26, 2009 at 6:24 pm

Dunno, I have to confess that I am ambivalent regarding this econ teacher. I do understand fully her distate for math in econ; but…. math does help to make the tradeoffs, that economics keeps talking about, much clearer. Math helps to illustrate the concepts.
Of course, there is a HUGE controversy on "how much math" Economics should have. Recently, Willem Buiter, in his Maverecon – Financial Times Blog, ranted against the "Dynamic Stochastic General Equilibrium" models, and his post had a huge, gynormous, response.
There is a limit on math in econ; but where is this limit? I think it is very difficult to say.

Manfred

Crusader March 26, 2009 at 6:41 pm

Manfred – then let's not pretend that the math-orientation in economics courses is about producing economists who can be plugged into the Keynesian system.

T L Holaday March 26, 2009 at 7:13 pm

Would you applaud as loudly an economics professor who showed photographs of Somalia to teach that government can be too limited?

Crusader March 26, 2009 at 7:23 pm

T L Holaday – the mathematics oriented economists have done just SO much good for us haven't they? Let's not pretend that economics is a REAL science like classical mechanics.

Greg Ransom March 26, 2009 at 7:36 pm

This professor is a true, genuine hero.

Most economics professors teach math, not economics, because its is far, far easier to teach and grade math than it is to teach and evaluated economic understanding.

CRC March 26, 2009 at 7:37 pm

T L Holaday, are you sure that your conclusion that "government can be too limited" is the correct one from the example of Somolia?

John V March 26, 2009 at 7:38 pm

T L Holaday,

There's so much more going on in Somalia that the absence of government. You are so intent on dwelling on this aspect of the matter that you miss the forest for the trees.

Consider this paragraph from the article:

"What do the first-world nations have in common? Quite a bit: the rule of law, competitive markets, tax rates that are not excessive, efficient capital markets, etc."

Somalia is extremely weak in these social institutions. The relationship between the health of economy and well developed social institutions is symbiotic. The role of government is a supportive one to this relationship. It's not THE issue.

You are choosing to dwell so much on the context-free paradigm of government size that you miss what it's really all about.

T L Holaday March 26, 2009 at 7:40 pm

Crusader, the relation between mathematics-oriented economists per capita and non-natural-resource GDP per capita is positive, not inverse.

John V March 26, 2009 at 7:40 pm

I think the real question, T L, is if you would choose to be a gadfly on the matter if a social democrat had supportively posted that link.

STS March 26, 2009 at 7:42 pm

Don – I agree with Kelly Markson completely. What surprises me is why we are not educating teachers to bring real economics down to high school and even middle school (6th, 7th & 8th). Just re-read Henry Hazlitt's "Economics in One Lesson" to remember that economics does NOT require mathematics. What our kid's teachers do need help with is a solid Hayekian foundation and fun lesson plans.

CRC March 26, 2009 at 7:46 pm

If I ever chose to change careers and become an economics teacher, this is what I would want to do.

Craig March 26, 2009 at 7:53 pm

I've read "The Wealth Of Nations" from cover to cover several times and I don't recall ever having come across a single mathematical formula. I learned an awful lot about economics, though.

Oil Shock March 26, 2009 at 7:53 pm

TL,
Does it matter to you that Somalia was ruled by a Soviet Socialist Apparatchik before it collapsed into chaos. These days of the internet, it is very easy to read up on history of nations including Somalia. Is this a case of passing comments on matters that you are ignorant about, or is it a case of pathological lying?

Asa March 26, 2009 at 7:57 pm

This teacher's approach was essentially the same approach that my first Community College Econ teacher used, and it completely hooked me on Econ. I ended up transferring to a four-year school and majoring in Economics. Econ IS fundamentally about human behavior – most people don't get that, confusing Econ with Finance. Incentives and trade-offs – those two concepts can be taught without a bunch of math, which is exactly what my professor did. Although the class did have some math – we had to calculate elasticities and present and future value, but not too many equations and formulas.

Daniel Kuehn March 26, 2009 at 8:01 pm

Crusader -
RE: "let's not pretend that the math-orientation in economics courses is about producing economists who can be plugged into the Keynesian system."

A little melodramatic, don't you think? If the Keynesian system is the only one that can be sustained in a mathematical economics (I don't believe it is at all), then that says more about the quality and robustness of the Keynesian system than it does about the value of math in economics.

OK – now that I have that out of the way, this is a great post, Don! I was first introduced to economics as a highschool course, and it was very non-mathematical. I went on to study it with the math, but that opening course did more to expose me to what is often refered to as "thinking like an economist" than many of my subsequent courses. I do think there's an important role for math – and perhaps others disagree with me on that point. But often complex modeling does more to distort fundamental concepts than illuminate them. It is very important to have these foundational insights.

Oil Shock March 26, 2009 at 8:05 pm

I was first introduced to economics as a highschool course, and it was very non-mathematical. I went on to study it with the math,

Did you study any non-mathematical economics after high school? Who are the non-mathematical economists who influenced you? which of their works?

Amy March 26, 2009 at 8:09 pm

Now I want to go back to school just to take a class with her! This is the attitude that more economics teachers should take.

Mike March 26, 2009 at 8:12 pm

Econ 100 shouldn't be a watered down version of graduate micro. It should introduce students to concepts and, to steal the name of one fine textbook, the economic way of thinking.

That can and should be done with a minimum of math. How many people have read Henry Hazlitt and gotten excited about economics? How many people have taken Econ 100 or its equivalent at colleges across the United States over the last 60 years and gotten excited about it?

How many people not majoring or minoring in economics can remember their Econ 100 class 10 years later? How many people can remmeber lessons from Hazlitt or Fredric Bastiat or Milton Friedman's Free to Choose 10 years or moe after they read those books? How much math is in any of those books?

Daniel Kuehn March 26, 2009 at 8:24 pm

Oil Shock -
Sure. Intro micro and macro in undergrad was marginally mathematical – but not that much. A "history of economic thought" class covered the physiocrats through Keynes, so that was short on math. I especially appreciated Smith, Malthus, and Keynes – Marx was interesting but I can't say he "influenced" me. I took a summer experimental economics workshop at GMU, and I appreciated the insights of Vernon Smith there (although only read a paper or two of his). I've read small portions of Hayek and Mises on my own. They were very interesting. Didn't strike me as anything I especially disagreed with – they just left me thinking "yes – but the world is far more complicated than what you present". I took a class on institutional economics in grad school that had very little math… I think not any. That was fantastic – one of the best econ courses I've ever taken. I was very impressed with the writings of Douglas North and Avner Grief in that course. As for the reading I've done on my own, I'm also a fan of Schumpeter. Galbraith has some thought provoking insights, but I think he comes across as predictable.

Are there any mathematical economists you're especially fond of, Oil Shock?

Daniel Kuehn March 26, 2009 at 8:33 pm

Oil Shock -
Missed the "which of their works" part:
Smith: Wealth of Nations
Malthus: Essay on population, and his exchange with Ricardo
Kenyes: General Theory, Treatise on Probability
Vernon Smith: I believe the paper was "The Two Faces of Adam Smith" or something like that, plus an article on auctions
Mises: The Free Market and Its Enemies, Epistemological Problems of Economics, Theory of Money and Credit (I'll stress I've only read pieces of Mises and Hayek – not too well read at all)
North: Institutional Change and American Economic Growth, Structure and Change in Economic History
Grief: Institutions and the Path to the Modern Economy
Schumpeter: Capitalism, Socialism, and Democracy
Galbraith: The New Industrial State

Also a fan of Weber, Skocpol, and Hall's economic sociology.

LowcountryJoe March 26, 2009 at 8:34 pm

Yes, the world would be a better place if more Econ instructors taught like this Kelly Markson does, especially at the high schools. Unfortunately, there's far too many people both young and old that will listen to and Idolize someone like Kelly Clarkson before trying to learn the wisdom this professor could impart.

LowcountryJoe March 26, 2009 at 8:35 pm

Just in case, close bold

Oil Shock March 26, 2009 at 8:38 pm

In other words Daniel, you studied non-mathematical economics mostly from mathematical economists.

I especially disagreed with – they just left me thinking "yes – but the world is far more complicated than what you present".

Wow, didn't you say that simplification is necessary part of the mathematical modeling, I mean a few days ago on this blog?

Are there any mathematical economists you're especially fond of, Oil Shock?

No!

Oil Shock March 26, 2009 at 8:54 pm

Closing bold again

DAVE March 26, 2009 at 8:55 pm

Manfred said – "but…. math does help to make the tradeoffs, that economics keeps talking about, much clearer"

That is, to you.

Daniel Kuehn March 26, 2009 at 9:02 pm

DAVE -
RE: "That is, to you."

I would think it would to anyone. Making a trade off requires that you determine that the benefits of something are greater than the costs of that thing. Clearly there are a handful of things that are all cost and no benefit or all benefit and no cost. But for most things – how would you DO that without quantifying it.

Generally speaking, a non-mathematical economics is one that eschews making tradeoffs… which is probably why the chief non-mathematical schools like Marxism and the Austrian school are so damn rigid in the solutions they provide!

To which I'm sure someone will respond "well Keynes has a very specific solution too". Yes and no – Keynesians still debate the "how much" question amongst each other. Marxists and Austrians don't even think the "how much" question is relevant.

I'm sure I'm oversimplifying – someone tell me how I'm oversimplifying if I am.

Greg Ransom March 26, 2009 at 9:05 pm

My introduction to economics was Douglas Norht and Robert Thomas, _The Rise of the Western World: A New Economic History_. What an awesome introduction to "the economic way of thinking."

Daniel Kuehn March 26, 2009 at 9:05 pm

Oil Shock -
RE: "No!"

Really??? I'm not saying how much do you agree with – I'm asking if there are any that you just enjoyed studying.

Maybe you just didn't enjoy any. That's ok – which ones have you read but not enjoyed?

RE: "In other words Daniel, you studied non-mathematical economics mostly from mathematical economists."

hmmm… not sure what you're saying. My professors for the institutions class, the experimental class, and the history of thought class were non-mathematical economists themselves. So no – I studied non-mathematical economists from non-mathematical economists. (I may be wrong about my institutions prof… he may have done some mathematical econ).

Daniel Kuehn March 26, 2009 at 9:07 pm

Oil Shock -
And my sociology profs under whom I read Weber, Skocpol, and Hall probably didn't make it too far past "2 + 2 = 4"

Oil Shock March 26, 2009 at 9:29 pm

probably didn't make it too far past "2 + 2 = 4"

I am an electrical engineer who works in Software Engineering. My math goes a tiny bit beyond 2+2.

Daniel Kuehn March 26, 2009 at 9:34 pm

I would hope it would, and I wasn't challenging your math. I was making fun of my sociology professor's knowledge of math.

So – since your math is so good and you have high expectations of how much non-mathematical economics I should be reading – who are some mathematical economists you've been reading?

Daniel Kuehn March 26, 2009 at 9:37 pm

Greg -
North is really an insightful read. I don't know if you've read his work on the English Civil War… that might have been in "The Rise of the Western World", I don't know. If you like that, pick up James MacDonald's "A Free Nation Deep In Debt" – it's very counter-intuitive which makes it an intersting read.

MnM March 26, 2009 at 9:54 pm

Some of you are clearly missing her point. She isn't saying that mathematics in economics is bad. She is saying that beginner students get lost in mathematics. So much so that they miss what's actually being taught to them. I saw it first hand as an undergrad with my fellow students.

then let's not pretend that the math-orientation in economics courses is about producing economists who can be plugged into the Keynesian system.

Crusader, the hyperbole doesn't help much. There are plenty of math-oriented economists that aren't Keynesian.

Would you applaud as loudly an economics professor who showed photographs of Somalia to teach that government can be too limited?

TL, John V is right. You're missing the point because you insist on thinking of us as anarchists. We aren't.

I've read "The Wealth Of Nations" from cover to cover several times and I don't recall ever having come across a single mathematical formula. I learned an awful lot about economics, though.

Craig, I know PhD economists who haven't made it through that book once. I tip my hat to you. Though you shouldn't be surprised to find his books math free; Smith was a moral philosopher.

I was first introduced to economics as a highschool course

Same here. And I had a stellar teacher. He was part of the reason I went on to study economics in college.

there's an important role for math – and perhaps others disagree with me on that point. But often complex modeling does more to distort fundamental concepts than illuminate them. It is very important to have these foundational insights

QFT. Very well said, Daniel. I added emphasis because this is precisely the problem that the article spoke of.

A "history of economic thought" class covered the physiocrats through Keynes,

Your history of econ thought stopped at Keynes? That's tragic.

Sorry for the long post; I got to this thread late.

misha March 26, 2009 at 9:56 pm

I'm assuming that Ms. Markson's "100-level" economics course is an introduction, or principles, course. If so, then yes, math should not get in the way of teaching economics to students who will never study economics again. But omitting math in economics courses for students majoring in economics would be like granting creationism and intelligent design the same status as evolution in a science classroom.

Daniel Kuehn March 26, 2009 at 10:09 pm

MnM -
On stopping at Keynes -
I thought so too. We covered Friedman in monetary economics, but it would have been nice to have the two together. I think people tend to pit one against the other unfairly. If Keynes was alive in the 1970s, I think he would have said "Friedman made some important revisions and corrections to my work that I agree with".

Anyway – I understand why they stopped the course. You probably need at least two courses on history of thought, with Marshall/Jevons/Walras as the dividing line.

Daniel Kuehn March 26, 2009 at 10:10 pm

misha -
Nice analogy. I really am impressed by this professor – but you can take a good thing too far as well.

Daniel Kuehn March 26, 2009 at 10:11 pm

Oil Shock -
You seem to be speechless! After issuing your challenge to me about non-mathematical economists, you HAD to anticipate that I would turn the question on you.

Or did you expect I wouldn't be able to answer?

Greg Ransom March 26, 2009 at 10:24 pm

"She is saying that beginner students get lost in mathematics. So much so that they miss what's actually being taught to them."

Hayek is saying that most economics professors get lost in the mathematics, so much so that they misunderstand what is actually happening in the real world.

MnM March 26, 2009 at 10:37 pm

You probably need at least two courses on history of thought, with Marshall/Jevons/Walras as the dividing line.

Probably, though I dare say Marshall deserves a class all his own. I believe the importance of Marshallian demand curves is oft underestimated.

Hayek is saying that most economics professors get lost in the mathematics, so much so that they misunderstand what is actually happening in the real world.

Believe me, Greg, I couldn't agree with Hayek more; many of the papers I wrote in school revolved around Hayek and at least one revolved around this very sentiment. However, this doesn't mean that there is no role for mathematics in economics. Students and professors need to be more careful in their statistical work and keep in mind the context of their studies.

Oil Shock March 26, 2009 at 10:44 pm

You seem to be speechless! After issuing your challenge to me about non-mathematical economists, you HAD to anticipate that I would turn the question on you.

I have a life outside of this blog. Sorry I am not your butler sitting here at your beck and call.

As for your question the only mathematical economists I have read at any length is Milton Friedman, and I disagree with him on a lot of things, except of course on things related to individual liberty. of course, I have read Minsky, though I completely disagree with his utilitarian solutions.

As for other snake oil math models that I am exposed to include, technical analysis, astrology etc.

Now I will let you answer this question to which you have been speechless for a much longer time.

Daniel: "I especially disagreed with – they just left me thinking "yes – but the world is far more complicated than what you present". "

Oil Shock: "Wow, didn't you say that simplification is necessary part of the mathematical modeling, I mean a few days ago on this blog?"

Oil Shock March 26, 2009 at 10:45 pm

closing block quotes

dg lesvic March 26, 2009 at 11:10 pm

We just had this discussion about mathematical economics below, in On Inequality, and Daniel Keuhn, for one, had a big part in it.

My position was that there was no such thing as mathematical economics, that mathematics contributed nothing to economics, neither in analysis nor exposition, and that it's only purpose was to obscure the subject.

I'd hate to have to go through that same argument all over again, so hope you'll check out the discussion below, at On Inequality.

CRC March 26, 2009 at 11:14 pm

While I'm not qualified to comment on the mathematical vs. non-mathematical approach, I will say that certainly for the introductory class (and in some cases ONLY class some people will ever be exposed to in economics) this sounds like a very engaging and useful approach.

Frankly, I think this level should be taught to every kid in America. That and a basic class in logic and reasoning (including an solid understanding of logical fallacies) might go a LONG way toward improving the state of our nation.

terminator March 27, 2009 at 12:37 am

The problem isn't with math – it's the models you use to exercise that math *with*. It's an inability on the part of people who misuse this stuff to now know what they don't know, they let themselves get lost in the comforts of some formula unaware of what it represents. Any model makes simplifications, the modeler must know what tradeoffs s/he made while using the formula in question.

Hayekian world view is mostly about "simulation" – or rather, is best represented through simulation, which is another form of math. Micro actions adding up to a global set of choices is what mathematics can easily represent.

The world is nonlinear, therefore the models have to reflect this. People incorrectly say "math is bad". No dimwit – what is bad is YOUR MODEL, not the math. People try to use linear models to represent nonlinear forces. Being honest about this fact will make our models to be more realistic and they will tell us what we do not know in clearer terms. Even though most nonlinear models are unsolvable, there are things you can infer from them, and that makes them an invaluable tool to evaluate an unknown, uncertain future.

dg lesvic March 27, 2009 at 1:13 am

Here, again that discussion of mathematical economics from On Inequality, below:

Daniel Kuehn,

You wrote:

"Economics is, in part, a logical science. It is not just a logical science, though."

You're right, up to a point.

From Murray Rothbard:

"Empirical fact enters into the theory, but only at the level of basic axioms," such as the disutility of labor, the variety of resources, and the goods on the shelves. But the theory itself is "apriori to all other historical facts."

You cannot construct an economic theory upon the shifting sands of statistics. Since statistical measurements are always of past events, never exactly repeating themselves, they are irrelevant to the eternal and immutable laws of economics, always exactly repeating themselves.

And, I would add that, without the statistics, there is nothing to calculate, and no mathematical economics.

Economics, beyond the level of basic axioms, is a purely theoretical and logical, or, more precisely, praxeological, science.

Posted by: dg lesvic

"progressive income tax increases inequality"

Another way to see why progressive income taxes can be expected to increase pre-tax income inequality is by doing a simple supply-demand plot for labor. Taxing supply shifts the supply curve left. Taxing progressively shifts the high end more then the low end, which steepens the supply curve. Draw this with two demand curves, one for high income jobs, the other for low income jobs.

Now look at the new equilibria. Pre-tax income is higher (though post-tax income is indeed lower) in both cases. But, since the shift was greater in the high income range, pre-tax income increases MORE for high incomes than for low incomes. Thus, the pre-tax income disparity increases (though post-tax income disparity decreases).

But what do progressive tax policy wonks typically use to measure income disparity? Pre-tax income! In so doing, they are creating for their policies a positive feedback loop.

Posted by: vikingvista

dg lesvic -

Rothbard was not the only economist that ever lived. You don't prove what economics is or isn't by quoting Rothbard. Most people who consider themselves economists and are considered economists by others take strong exception from some of the requirements that Rothbard mentions in that "quote". He's a smart guy – definitely a man worth quoting. But he's not the final word. The world's a lot larger than praexeology, buddy.

Posted by: Daniel Kuehn

In pictures or in words, a curve by itself has no meaning in economics. It must still be explained in other terms. With the other terms, why do you need the curve? If demand goes down as price goes up, why not just say so, why that “the demand curve slopes downward?” Why translate from straightforward language into a circular maze, and meaning into non-meaning?

Being a logical rather than mathematical science, economics does not need the foreign language of mathematics any more than Greek or Latin, supply and demand curves any more than Gregorian chants. It just needs plain English.

What is the purpose of circumlocution other than to conceal the fact that you really have nothing to say, and of obstacles to economics other than to keep the public, and real economists, out?

Posted by: dg lesvic

"With the other terms, why do you need the curve?"

Not need, want. Because it is more efficient. Supply-demand curves merely describe in a more concise way just what your words say. It is meant to be shorthand. You can parse a paragraph of text, or if you understand S-D just picture the curves and get the same understanding in about 5 seconds. It isn't mathematical truth, just another mode of description.

But like any tool, if it doesn't work for you, then don't use it.

Posted by: vikingvista

the reason why you need a curve is that curves have elasticities, whereas sentences don't. Elasticities have important implications – are they large or small? And elasticities can be measured empirically.
When you just rely on "logical axioms" you can answer general questions… maybe… if your axioms are right. But you can't answer one of the most important questions out there: "by how much?".

Posted by: Daniel Kuehn

Vike,

You wrote:

"Supply-demand curves merely describe in a more concise way just what your words say."

What is the shortest distance between two points?

Paraphrasing Rothbard:

It is the great quality of logical propositions that each one is meaningful. On the other hand, mathematical expressions, a foreign language, are not in themselves meaningful. To develop economics logically, then translate into mathematics, and then back into logic makes no sense. It violates the fundamental scientific principle of Occam's razor, which calls for the greatest possible simplicity in science and the avoidance of unnecessary multiplication of entities or processes.

Contrary to what might be believed, the use of verbal logic is not inferior to logistics. On the contrary, the latter is merely an auxiliary device based on the former. For formal logic deals with the necesary and fundamental laws of thought, which must be verbally expressed, and logistics is only a symbolic system that uses this formal verbal logic as its foundation. Therefore, praxeology and economics need not be apologetic in the slightest for the use of verbal logic — the fundamental basis of symbolic logic, and meaningful at each step of the route.

See Man, Economy, and State, Pp 65,66.

Posted by: dg lesvic

Daniel Kuehn,

You wrote,

"The world's a lot larger than praexeology, buddy."

But economics isn't.

You cannot derive the principles of economics from the data of history, what never changes from what constantly changes.

As Mises put it,

"The insight that, ceteris paribus, an increase in demand must result in an increase in prices is not derived from experience. Nobody ever was or ever will be in a position to observe a change in one of the market data ceteris paribus."

Posted by: dg lesvic

ME: "Supply-demand curves merely describe in a more concise way just what your words say."

YOU: "On the contrary, the latter is merely an auxiliary device based on the former."

So, you are arguing with me by rephrasing me?

Posted by: vikingvista

Vike,

It might be useful for you, taking notes in class for a friend, who was absent that day, to do so in shorthand. But what would he do if you turned them over to him in that form?

He'd tear them up, and say, thanks for nothing!

And that's what I say to your economic "shorthand."

If your thoughts aren't worth the bother of spelling them out in "longhand," they're not worth the bother of my trying to understand them.

Posted by: dg lesvic

Maybe we can compromise and say that Austrian economics is constrained by praexeology. I'm not even sure if that's true, though – I know Austrians that use data. Regardless – by quoting Rothbard and now Mises you're demonstrating nothing about economics as a discipline – you're just demonstrating something that Rothbard and Mises thought about economics as a discipline. And the fact that they remain quite embattled on that point to this day should indicate to you that you aren't quite making your case yet.

Posted by: Daniel Kuehn

On the shorthand analogy – the difference is, mathematical models are understood by the vast majority of economists. So it's not an irrelevant shorthand that your friend would just tear up. If anything, it's far better than language because math is a universal language – and it can be understood in places where English can't be.

You never responded to me about supply and demand elasticities. when viking draws a curve and estimates it with some data, he can tell you (with some degree of error, obviously) what percentage response in quantity you can expect from a percent change in price.

Can your sentences do that? Whether an elasticity is high or low makes a HUGE difference in what will happen if the government intervenes in that market. By forgoing that information, you're really forgoing the ability to intelligently comment on that sort of market intervention.

Posted by: Daniel Kuehn

"If your thoughts aren't worth the bother of spelling them out in "longhand," they're not worth the bother of my trying to understand them."

If S-D isn't part of your language–if you don't know how to spell it out in longhand–then it isn't useful to you, and that is fine. But it does form a common language–less ambiguous than English–for those versed in entry-level economics, and to them it is a very useful shorthand for concepts that were spelled out long ago.

To separate myself from another poster, I wouldn't put numbers on the plot. The curves are less useful as a quantitative than a qualitative descriptive tool.

Posted by: vikingvista

if you "wouldn't put numbers on the plot" how do you know if the demand curve is elastic or inelastic?

All your conclusions are going to be determined by which it is. Do you just assume that it's one way or the other?

Posted by: Daniel Kuehn

"if you "wouldn't put numbers on the plot" how do you know if the demand curve is elastic or inelastic?"

You don't. The numberless curves however are very useful for describing the real concept of elasticity.

Posted by: vikingvista

Daniel Keuhn

As you said, the language of curves is understood by the vast majority of economists, as Latin is understood by the vast majority of priests. But, if economics is to be more than priestcraft, it must speak in the language of laymen.

You said that mathematics is a universal language. It is a world wide language, but that's not exactly the same thing as being a universal language. It is still a foreign language, everywhere, not the language that we learn at our mother's knee, or in the schoolyard, but in classrooms, as we Americans would learn French or German.

When in France or Germany, we must speak French or German, and, when in mathematics, speak mathematics. But why speak French or German in America, or mathematics in economics?

And, as you said, praxeology is of no use in quantitative analysis. It is a logical, not a quantitative science.

But you're confusing the passing data of econometrics with the eternal truths of economics. Since there is none of the passing data in the eternal truths, there are no quantities, and no mathematics. However essential to econometrics, it is irrelevant to economics, and, its only purpose, to obscure it.

Posted by: dg lesvic

If everything is subject to the eternal truths of economics then history is subject to the eternal truths of economics. And if history is subject to the eternal truths of economics, then why not use historical data to learn something about the historical truth of economics? If you think the data is invalid, then you seem to be admiting that the truths aren't eternal.

Sure – when you talk to laymen you state things more clearly. Hell, when you talk to undergrads you state things more clearly! But that's just pedagogical strategy. That doesn't imply that math and data is an inaccurate way of understanding economics.

Posted by: Daniel Kuehn |

You slipped from the "eternal truths" to the "historical truths" of economics.

There are no "historical truths" of economics. History and economics are two separate subjects. While economics informs history, history does not inform economics.

You wrote,

"Sure – when you talk to laymen you state things more clearly. Hell, when you talk to undergrads you state things more clearly! But that's just pedagogical strategy."

It's science as opposed to priestcraft.

You wrote,

"That doesn't imply that math and data is an inaccurate way of understanding economics."

"Math and data" are irrelevant to economics, and tools not of its exposition but obfuscation.

Posted by: dg lesvic

well then switch my "historical truths" for "eternal truths" and my question remains. If these truths are eternal then orchestrate the course of history. If they orchestrate the course of history, we oughta be able to use historical data to learn something about them. Don't pretend my word choice changes the underlying point. It's semantics.

On: "It's science as opposed to priestcraft."

I can do that too! Watch:

Praxeaology is priestcraft. Econometrics is science.

See how I did that? I just switched the words? Doesn't prove a thing.

On math, data, exposition and obfuscation.

Once again, you are ASSERTING things.
Explain why.

If you really believe in eternal truths of economics you should have nothing wrong with looking at historical data.

Posted by: Daniel Kuehn

Daniel Kuehn,

You wrote:

"And as Alfred Marshall, the great neoclassical economist said:

'Nature's action is complex: and nothing is gained in the long run by pretending that it is simple, and trying to describe it in a series of elementary propositions'"

I don't have Mises' exact words right before me, but, as best I can recall them:

There is no means of studying the complex phenomena of change other than by abstracting from change altogether, and analyzing each factor of it under the assumption that all other conditions remain constant.

That is the specific method of economics, and what separates it from history.

History must analyze the interaction of all the factors of change, but cannot do so without understanding each of them by itself.

That is why economics informs history, but not vice versa.

Posted by: dg lesvic

excellent exposition of what mises thought about what economics is.

Posted by: Daniel Kuehn

Crusader March 27, 2009 at 4:26 am

Daniel – the problem is that you think economics is a science. It is not a science. It has many theories but not much proof. There are so many unknowns that go into the collective human decision making processes that form macroeconomics. Even microeconomics is not simple because every person has a different psychology. Your equations can't factor for this.

Crusader March 27, 2009 at 4:27 am

Bottom line is there are no irrefutable laws of economics, unlike say in chemistry or classical mechanics. Those are hard sciences that can be objectively understood. When we have "capitalist", "keynesian" or "communist" economics floating around, that pretty much says it all. Economics is junk science.

Daniel Kuehn March 27, 2009 at 6:09 am

Oil Shock -
RE: "Wow, didn't you say that simplification is necessary part of the mathematical modeling, I mean a few days ago on this blog?"

I'm not sure what you expect me to respond to. Simplification is necessary, not just to mathematical modeling but to any explanation of an idea. But any given model is only as good as the assumptions that went into it. If the simplification isn't tenable, then the model isn't tenable. What I was talking about above about Austrians was that while I am convinced by arguments about central banks and malinvestment, markets synthesizing dispersed information, etc. etc. – the Austrian school seems to rely on a few key insights while ignoring a lot of other potential causes of downturns and other potential pitfalls of markets. Not that I'm that well read in the Austrian school – that's why this is just my impression.

So… of course simplification is necessary. That is elementary. But if you simplify poorly, or fail to qualify the limitations of your simplifications, that is bad.

Daniel Kuehn March 27, 2009 at 6:14 am

CRC -
RE: "It's an inability on the part of people who misuse this stuff to now know what they don't know, they let themselves get lost in the comforts of some formula unaware of what it represents."

I absolutely agree – this is something you need to watch out for in mathematical economics. But I hardly see how this problem is restricted to mathematical economics. On another post, [some] people were denying the very existence of market failures and externalities, and claiming that we had property rights to things like air. And they justified it with a perspective that I guess you could call Austrianism – regardless, it was a non-mathematical, pro-market perspective. How is that being any less ignorant of the implications of your arguments than mathematical economists who don't know the full implications of the assumptions they're making?

I think this is a basic logical pitfall to be avoided in general, in any field. It's not a unique indictment of mathematical economics.

Daniel Kuehn March 27, 2009 at 6:15 am

Sorry – that last one was a response to terminator, not CRC

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