ECONOMIC BEHAVIOUR IS NOT A MATHEMATICAL SCIENCE

Edward Chancellor posts (17 April) in Breaking News HERE

“Back in the 18th century Adam Smith established economics, according to Desai, as a combination of philosophy, history, economic theory and some practical policy advice yet modern economists, while adept at mathematics, lack Smith’s intellectual breadth. In particular, they are largely ignorant about economic history and know even less about the intellectual development of their own discipline.

As a result they fail to learn the lessons of history. …

Desai suggests that many of the flaws of economics derive from the attempt to turn the subject into a science; a development he traces back to the father of economics, David Ricardo, who theorised that the economy tends naturally towards equlibrium. Such a balanced state can be modelled mathematically with ease, allowing economists to satisfy their “physics envy”. As Desai points out modern economists are wedded to mathematical models, despite the models’ reliance on highly unrealistic assuptions about the real world.”

Comment

I came acros this piece while browsing through the web this morning - taking a short break from preparing my new paper: “Adam Smith on “Self Betterment, Self-Interest, the Invisible-Hand metaphor and Intended and Unintended Consequences” - and thought it would interest readers.

In the mid-1970s, I attended several seminars at LSE (I was lecturing at Brunel University and National Defence College at the time) where, on occasion, I heard Professor Meghnad Desai of LSE (now retired) enthusiastically contributing to the various seminar topics. He struck me as an academic with his feet on the ground. I certainly agree with his quoted views above.

Working on my new paper, I cannot help but agree with Deasai’s general criticism of modern economists for their near total neglect of history and their almost total reverence for mathematical models with little connected relevance to the real world now or thoughout the history of the human species. Smith’s historical approach was richer in relevance and enabled him to write authoritatively about real people’s behaviours influenced and affected by their interactions with other real people, as the real people of history demonstrated.  Be clear too, that Desai was far from being innumerate and could ‘mix-it’ with his mathematically-minded collegues, of which LSE at the time abounded. (I published three text-books based on my lectures to undergraduates: 'Mathematics for Innumerate Economists' (1982); 'Invitation to Statistics, 1983, and "Defense Economics", 1983).

I have spent four days re-reading Wealth Of Nations - with side-forays into his “Lectures on Jurisprudence” and “Moral Sentiments” - while I went over my previous red-dotted paragraphs in his texts where Smith referred to the behaviours of a cast of self-interested players and how they behaved under such stimuli, when confronted by choices of economic and political importance to themselves (it is not a pretty sight). 

The general impression over the centuries that Smith covers is not attractive to those who believe, despite the evidence of millennia, never mind today, that people are and have been imbued with a matchless sense of humanity, qualifying their descendents, especially  in modern economies, to behave in the manner assumed by abstract mathematical models. You can measure and appreciate the regular and predictable behaviours of atoms, but, alas, not people.

I shall also take this opportunity to explain my few posts recently, despite a queue of possible posts I have lined up for Lost Legacy. My paper is taking all my attention at present and may do so for a few weeks more. It is progressing well and I am happy with its general approach. It requires knitting together without adding too much new material.