Tuesday, May 26, 2015

Mark Buchanan — In Economics, What Calculates Isn't Always Right

This mathematical-purist approach came from a rather odd place. As Roy Weintraub relates in his excellent book "How Economics Became a Mathematical Science," Debreu took his perspective from a secret group of French mathematicians who, starting in the 1930s, worked under the pseudonym “Nikolas Bourbaki.” The Bourbaki group thought mathematics should have an almost religious purity, refined and unsullied by contact with the practical. Educated in Paris, Debreu came under their influence, and then shifted from mathematics to economics. 
Weintraub argues that Debreu played a decisive role in transforming economics -- “not only the field's self-image, but its concept of inquiry itself.” Ever since, economic math has been Bourbakian, primarily concerned with formal structure. Practitioners downplay the need for realistic assumptions, as Paul Fleiderer noted in his brilliant essay on chameleons. They use highly dubious suppositions to generate a result, which they then use as a foundation for giving advice to policy makers. This is pretty much the opposite of good science. 
Scientists generally enlist mathematics only as a tool, and ultimately value practical understanding above theoretical rigor. They care deeply about the plausibility of the assumptions used in any model. Models, of course, are always oversimplified -- one might say “wrong” -- but it's what they get right that matters. A sphere is a good model for the Earth not because it lacks any geographical detail, such as mountains or valleys, but because it gets the rough shape right. 
The Bourbakian influence in pure mathematics actually caused a rift between physicists and mathematicians back in the 1980s. The formal and pure Bourbakian approach seemed useless to the physicists, whose more practical approach seemed suspect to the mathematicians. Since then, that rift has disappeared as math has moved on. Economics apparently hasn't recovered yet.
Good article on how conventional economics got where it is. 

It's all in the head.

Bloomberg View
In Economics, What Calculates Isn't Always Right
Mark Buchanan

See also

Lars P. Syll’s Blog
Lars P. Syll | Professor, Malmo University

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