Wednesday, August 28, 2013

Economics: History or Physics?

Jag Bhalla asks Is Economics More Like History than Physics?"
“Is economics like physics, or more like history? Steven Pinker says, “No sane thinker would try to explain World War I in the language of physics.” Yet some economists aim close to such craziness.
Hat Tip to Dr Steven Kates, School of Economics, Finance and Marketing
RMIT University Melbourne , Australia
A brilliant, brief, and timely question from Jag Bhalia, whom I have quoted from before on Lost Legacy.  It raises many questions that the discipline must face about its own history, especially at its turn from the 1870s to the use of mathematics (calculus of two variables primarily) that ignored Alfred Marshall’s advice to A.L. Bowley, a former student and distinguished pioneer of mathematical economics and statistics in the 1920s, to: “(1) Use mathematics as shorthand language, rather than as an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life (5) Burn the mathematics. (6) If you can’t succeed in 4, burn 3. This I do often”.
From then on the mathematics took over and the more difficult work of wrestling with many influences operating on even simple decisions in economics were set aside, even derided with sneers in the profession.
It is not that maths is not a useful tool; it is, but it depends on what form the maths take. 
I recommend David Simpson’s new book: “The Rediscovery of Classical Economics: Adaptation, Complexity and Growth.” Edward Elgar, 2013. 
Simpson is an accomplished mathematician who abandoned neoclassical economics after his career in academe and applied economics consultancy. He advocates a more modern maths than that derived from 19th century physics. 


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