The Use and Abuse of Mathematics in Economics
08 August 2017 | Pago Pago, American Samoa
The claim of economics to be a science depends on its ability to be predictive. But what does that mean? Does it mean to be able to predict the direction of effect of a measure as a result some other change, the general magnitude of the effect or the precise degree and direction of effect? The answer is not generally clear and depends on what it needed. More precision, if possible, comes at a price.
At a micro level economic prediction is better than at a macro level, but that does not mean macro prediction is always bad, depending again on what we mean by prediction. It is at this point we have to ask what then are the uses and abuses of mathematics, to include statistical and econometrical analyses, in economics. The abuses are many.
When simple English will do, why use math at all. Math alienates many; math blocks communication to many; math is used to limit the distribution of knowledge to acquire power or dominance; math is used to show off math skills; math is used to impart a false and mock precision to the analysis; math can be used to obfuscate or confuse issues; and math is used to have economics dominate the other social sciences as being "more scientific." These are the abuses of math in economics.
I believe, from my experience as a lawyer, that there is a "communicational imperative" to economics, so I use little math in what I write although I have a BA in mathematics and understand it at higher levels. As Milton Friedman used to say, if you can't express the idea in simple English, math is of no use. However, economics is the most scientific and predictive of the social sciences because much is quantifiable in economics because most all is measured in dollars.
The proper roles of mathematics in economics, are, as Paul Romer at NYU suggests, are to help economists to clarify their thinking and reasoning, but also as a teaching and expository tool. This is not to say work on large macroeconomic models should not continue; only that they should not be oversold as they too often are. We do learn from the efforts. John Cochran at Chicago might be correct; the problem is not too much math in economics, but too little math and underlying knowledge. Those efforts should proceed; just not be oversold.
At present math is of help in economics, properly used. At a micro level, it is imperative. Even at a macro level, we do have predictiveness as to direction and general magnitude in much mathematical and statistical analyses. But it is hard, at present , to for math to beat a really good economist working off mostly just his knowledge of the economic circumstances and his own good intuition, That is what Friedman used to say and I think it is still true. The failure of economists to predict the Great Crash was simply because most weren't paying any attention to the financial sector at the time. A few who were, did predict the disaster.