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In November 2008 the late Queen visited the London School of Economics where she asked Professor Tim Beseley and Peter Hennessey why economists had failed to foresee the financial crash. Their response went something along the lines of :“It was a failure of our best mathematical minds in our country and abroad”. So, if maths failed then, why is economics increasingly dependent on the discipline? From the vast amounts of maths that you will likely skim-read in an economics paper to the TMUA, it is clear that mathematics is embedded throughout all of modern economics. As the neoclassical school of thought has grown to dominate the field, so has the use of maths but is this new economics the best economics?
Traditionally, economics is the study of the allocation of scarce resources, yet today, we often think of the subject in terms of the phrase “minimum effort maximum outcome”. The 19th century marginal revolution shifted economics away from broader questions of wealth distribution towards more calculable problems. The publication of the Wealth of Nations in 1776, only used numerical analysis to qualitatively assess government policies, yet no graphs or equations were used. Hume only used pure logic to explain the impact of free trade in his price-specie flow mechanism theory. It was only through Keynes that maths started to become so prominent in economics, as evidenced by his General Theory and the relationship between income and expenditure. If you would like to have a paper of yours published in an esteemed economics journal, it is said that you ought not to say anything new or revolutionary, but instead build upon what is already known. Perhaps this is indicative of the fact that all good ideas have been discovered early, leaving later researchers to develop evermore detailed and technical variations of existing themes.
This video looks at how the 2010 Economic Nobel Laureates view the role of maths in economics and the subjects supposed transition towards a science.
With a growing dependence on maths, an oversimplification of human behaviour has come about. Thus, in theory, you only need to look at your negative marginal utility to tell you how much chocolate will make you ill- though I doubt even a doctor could know this. The Solow-Swan Model is a perfect example of how economics is quantified; where it aims to calculate long-term growth based on productivity, population growth and other factors. However, there are many things a model like this cannot consider. For instance, the transition from a command to market economy during the 1991 Soviet collapse would have impacted the sallow swan model, but how can this be quantified? Micahel Kitson argues for a shift away from maths, towards a greater incorporation of other subjects such as history and philosophy. Whilst others claim that shortcomings are the result of unsophisticated maths, rather than an overdependence.
Despite its undeniable value, the downfall of maths in economics is this demand for tight microfoundations. This refers to the underlying microeconomic mechanisms that explain macroeconomic phenomena. Overall, this push stems from a desire for rigour in economic modelling. As well as the practised notion of a rational agent and the idea that the market will always return to equilibrium. Maths holds back potential for advancement in the study of economics. But what is the alternative? Without maths, economists would just be “telling stories… which is what ideologues do when they want to justify policy” .
As we have created “a fictional character out of desire for wealth and an aversion from labour” it is only natural that maths has become so dominant in economics. Whether it is more or less maths that could have helped foresee the 2008 financial crash, it is undeniable that the scope for imagination and progress in economics is hindered by the rigidity of maths. Science exists to serve other scientific purposes- it serves the people who practice it. Economics should not exist to serve other economists; it should exist to serve its successors.
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