The answer is easy: because math is numbers and numbers are measurement and measurements are necessary to make a subject “scientific” in the modern sense of that word. Why should economics be turned into a (modern) science? Because scidolatry, partly.
Our starting point is an article at Aeon “The new astrology: By fetishising mathematical models, economists turned economics into a highly paid pseudoscience” by a fellow named Levinovitz. It is not incidental that he opens with:
…colleges and universities have faced increased pressure to identify essential disciplines, and cut the rest. In 2009, Washington State University announced it would eliminate the department of theatre and dance, the department of community and rural sociology, and the German major — the same year that the University of Louisiana at Lafayette ended its philosophy major…in 2011, the state of Texas announced it would eliminate nearly half of its public undergraduate physics programmes. Even when there’s no downsizing, faculty salaries have been frozen and departmental budgets have shrunk.
Diversity consultants and administrators are doing just fine, incidentally. And what we need “majors” for, anyway? Students at Oberlin want degrees given to them for protesting. Yes really.
Anyway, Levinovitz’s point is academic economists are doing fine—despite any of their theories and Reality being on speaking terms.
Paul Romer of NYU put a paper: “Mathiness in the Theory of Economic Growth“, the abstract of which is pure gold:
Mathiness lets academic politics masquerade as science. Like mathematical theory, mathiness uses a mixture of words and symbols, but instead of making tight links, it leaves ample room for slippage between statements in the languages of words as opposed to symbols, and between statements with theoretical as opposed to empirical content. Because it is difficult to distinguish machines from mathematical theory, the market for lemons tells us that the market for mathematical theory might collapse, leaving only machines as entertainment that is worth little but cheap to produce.
Amen, brother, Amen. Romer told Levinovitz:
‘I’ve come to the position that there should be a stronger bias against the use of math,’ Romer explained to me. ‘If somebody came and said: “Look, I have this Earth-changing insight about economics, but the only way I can express it is by making use of the quirks of the Latin language”, we’d say go to hell, unless they could convince us it was really essential. The burden of proof is on them.’
More: Leviovitz discovered a paper by Stanford’s Paul Pfleiderer, “Chameleons: The Misuse of Theoretical Models in Finance and Economics“. Abstract:
…theoretical models in finance and economics are used in ways that make them “chameleons”…A model becomes a chameleon when it is built on assumptions with dubious connections to the real world but nevertheless has conclusions that are uncritically (or not critically enough) applied to understanding our economy…[I examine] the unfounded argument that models should have equal standing until definitive empirical tests are conducted, and by misplaced appeals to “as-if” arguments, mathematical elegance, subtlety, references to assumptions that are “standard in the literature,” and the need for tractability.
Preach it, baby! Preach it!
Math can be used to good effect in economics, and even in sociology, psychology, and so forth. But it’s like I’ve said precisely 842 1/3 times, when a thing which is essentially unquantifiable is quantified, the quantification is morphed into the thing. The Deadly Sin of Reification strikes! The parts of the thing not quantified are forgotten and dismissed as unimportant. The quantifiable parts swell in importance like Bill Clinton’s ego. Over-certainty necessitates.
Economics, properly understood, is the study of human interactions. And human interactions are only badly and crudely quantifiable. Now at this point counter-examples will occur the economist steeped in the numerical traditions. “What about this model of GDP? What about that model of option pricing?” and so on. But what won’t come to mind any from the greater set of non-numerical examples. Most interactions, most historical events aren’t chartable. They are therefore not amenable to modeling. Therefore they fade into insignificance.
Point in case: “Robert E Lucas Jr writes rhapsodically about the importance of mathematics: ‘Economic theory is mathematical analysis. Everything else is just pictures and talk.'”
Pictures and talk. How childish. Well, since we can’t put an equation to Vladimir Ilyich Ulyanov’s infamous train ride, a highly significant economic change point, then it must not be important. No differential equation to see here! No Dickey-Fuller, no academic purchase.
Let’s give Levinovitz the last word:
For more than a century, the public has been warned, and the way forward is clear. It’s time to stop wasting our money and recognise the high priests for what they really are: gifted social scientists who excel at producing mathematical explanations of economies, but who fail, like astrologers before them, at prophecy.
Update See also the last chapter of my upcoming book, where I discuss quantifying the unquantifiable.
Categories: Culture, Philosophy, Statistics
“The parts of the thing not quantified are forgotten and dismissed as important.”
I’m often wrong about these things, but I think you mean “UNimportant”.
The plague is the misapplication of numbers, not number per se. Economics is about system flow which often can be measured in discrete units. Saying trade is going fast or slow isn’t as useful as saying that it’s up or down 15% over the same time period a year earlier. Of course, context — emphasis on “text” — is crucial to give the numbers depth and purposeful meaning.
Is it possible that Robert J Lucas Jr’s rhapsodic castigation of “pictures and talk” was an indictment of Theory over evidence? Just asking because I don’t know the reference.
“when a thing which is essentially unquantifiable is quantified, the quantification is morphed into the thing.”
Not just economics. I dropped out of the American Political Science Assn. a couple of decades ago, when their journals filled with the unmoored ramblings of pseudo-mathematical models. There’s an excellent book from the ’60s that looks at this phenomenon in depth: Essays on the Scientific Study of Politics, edited by Herbert Storing.
That’s odd. I wouldn’t’ve thought my enemies would be alert at the start of this long weekend.
I guess a degree in “protesting” will work out well with the welfare check, free phone, rent-free lives these students plan on living. If they want more money, they’re certainly qualified to protest for more.
Economics has been fantasy for years. Maybe it always was. The addition of “models” just added to the fantasy. Reminds me of the difference between accounting and bookkeeping. One is real, one is a fantasy.
Of course, if you simply realize progressives don’t care, all of this makes perfect sense. All you need is models that show you do care when you don’t. Numbers add to the legitimacy of your claim, of course.
Peddlers of doom and models will always be popular. People want to believe. It’s the truth they don’t care about.
Turns out to be false math. Steve Keen appears to be a little more fluent in math, and he’s debunked quite a few of the most basic assumptions. He wrote a book called Debunking Economics. His lectures are on youtube as well.
It feels an awful lot like a huge change. I am used to the Austrian school of economics, but I also listen to some of the more mainstream guys. But here is Keen, with a model that actually makes sense of the current economic system.
Fr. Stanley Jaki put it very well (“Questions on Science and Religion”)
“Science has to measure in order to legitimate any of its claims and discoveries.”
But then after it has measured such, it does not say what energy is, what a quark is, what a quantum field is, except in terms of measurable–quantifiable–things.
More importantly, science as such is limited, as Fr. Jaki explain in “The Limits of a Limitless Science”.
“Science cannot answer the question ‘to be or not to be’.”
When I was a volunteer tutor for an introductory Economics course.
There were a lot of people who needed help finding the slope and y-intercept.
“Peddlers of doom and models will always be popular”
No, they’ll always have an audience. Some people don’t want to hear that everything’s going to be okay. When you get people on their own, that’s what they want to hear.
The money is made on the solution, remedy, cure, safeguard. The fear must be evoked for selling of any of those things. As the old saying goes, emotion sells.
Richard Linzen said on peddling cheap virtue: “Changing a lightbulb, to save the world: it’s a high for some people, but it’s nonsense.”
Accounting is not fantasy.
Reminds me of the accountant who was something in the city of London and who was not allowed to do his own accounts for reasons of conflict of interest. His investments had to be managed by another party for the same reasons and who banked with Coots. Clearly a fantasist?
The ignorant teacher at parents evening told him about his son:
“never mind, he can always become an accountant.”
The boy’s now a successful, self reliant, self made, businessman in New Zealand and is a happy man. The accountant was his Godfather, it’s rare for Godparents to actually have to carry out their promises.
Then there’s the doomsayer teacher who told Robbie Williams he would always be a failure.. (worse, in fact.) He’s not very popular with Robbie as his ‘karma Killer” track is dedicated to the predictor of doom. The lyrics are so hateful they’re funny. I don’t think he swears but I could be wrong.
Or: the employe of the modelling agency fresh from school who was told by the real life ‘Devil Wears Prada” type boss:
“there are indians and chiefs and you, my dear, will always be an indian.
She’s doing rather better than that.
Or: the witchipoo physio with black sticky out hair and a cloak old nursie style who told her student who couldn’t reach (she could, actually, but) high enough to hold up the nearly empty drip,
“it’s not every day you’ll have a Dr to help you carry the drip for your patient, sigh, and on and on and on for a month”.
I say keep calm and carry on. When you’re going through hell, keep going.
Reminds me of the difference between accounting and bookkeeping. One is real, one is a fantasy.
Like Arthur Andersons accounting for Enron. Enron was always profitable even when they were losing money. Arthur Anderson received the Ignobel prize in mathematics for the use of imaginary numbers in accounting.
That is the argument put forward by people who wish to dismiss a given honest professional because of association. You may decide to hate all accountants or any other given group which is separate.
Some policemen break the law, some clergymen do the unthinkable, some postmen steal the post. All should not be labeled for the actions of a few. It’s a rule that applies no matter how many crooked businessmen or accountants you can name. Many individuals and companies still haven’t been held accountable for their part in the financial crisis. This does not equate to ‘accountancy is fantasy.” It was called ‘creative accounting’, and other euphemisms for crooked.
The reason was because they were not acting as accountants should.
The same accountant resigned his work in the city in his fifties without a job to go to because ‘my word is my bond’ which always applied was no longer applicable. He did not agree with the changes that were taking place.
This is old news. The Austrian School pointed this out late in the 19th and early in the 20th Centuries.
QUOTE: “Why should economics be turned into a (modern) science? Because scidolatry, partly.”
Oh geez…from that launches the familiar tabloid-type examples as sweeping conclusions to support a contrived topic …
Economics is a discipline performed by many – large companies, for example. Does anyone really think/believe that such enterprises succumb to pseudo-economics (or if so, for very long) of the sort Briggs picks as representative examples of the broad discipline? Such enterprises develop & apply economics—that works for them—to make a profit.
Does anyone really think that such enterprises bother to consider if the particular form of economics they develop & apply and/or reject is or isn’t also “science”? Of course not, they apply Caveat Emptor & select what works for them, rejecting what doesn’t. The engines that really run an economy don’t come close to the nonsensical contrived issue presented – and those do have influence over the politicians that do accept such drivel.
Consider Warren Buffett’s brief (about a page) economic forecast from Berkshire Hathaway’s latest (2015) annual report (see page 9 (PDF)/page 7 accessed via http://www.berkshirehathaway.com/2015ar/2015ar.pdf); it starts out thus:
“It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do.
“That view is dead wrong: The babies being born in America today are the luckiest crop in history.”
Read the rest, consider the snippets of economics applied and judge for yourself – is the “economics” rationale Buffet presented & resulting conclusions reasonable? Chances are you’ll have little doubt the general accuracy of Buffet’s economics-based outlook. And chances are you’ll see by that simple example how pointless it is to argue if “economics” is or isn’t a “science.” If it gave you an insight you can use, what difference the label under which it gets filed…
If anyone is paying attention, the giveaway is in one of the selected quotes, “Mathiness lets academic politics masquerade as science.” Perhaps in the world of academia pseudo-science is taken seriously … but in the real-world (even so some extent in government politics) reality is an uncompromising judge – and in that realm the crank philosopies get found out rather quickly & cast aside. At least most do.
QUOTE: “A model becomes a chameleon when it is built on assumptions with dubious connections to the real world but nevertheless has conclusions that are uncritically (or not critically enough) applied to understanding…”
That’s presented as bad — because it’s contrived to bash a discipline on a basis that in actual practice matters not a whit — but curiously one can substitute the word “model” with “philosophy” and similarly conclude philosophy is a crank discipline…
I think Ken may be a tad overstating the case for economics-that-works. If by ‘works’, Ken means, “big-time companies rely on ‘economic analysis’, then that’s obviously true.
But if ‘it works’ means, ‘has noticeable long-term predictive skill’, maybe not so much. For instance, I heard a big-time financial analyst say to my face that he completely missed the crash of 2007-2008; it was not even on his radar, nor was it on the radar of anybody he talked to or consulted. Which included a whole bunch of highly-paid private economists doing economic analysis for his very big-time firm. And I’ve sure heard about how almost anybody who was anybody also missed it, too. I’m pretty sure all those big-time financial companies were using economics.
So just the fact that (some of the) companies that pay for economic analysis stay in business is no proof that the money they spent on economic analysis was particularly worth it. Ken should also consider the failed companies who also paid for economic studies right along with the companies who are still around.
Steve Sailer, who used to work in market research, is fond of making a distinction between market research and science. His basic point is that, in business, you can do all the science-y and big data things you can think of, and typically the model that you carefully develop will work, at least for a few months. Maybe. Then the model ‘changes’.
This whole scenario is great for market researchers, by the way. It’s sort of like you get paid to make a 5-day weather forecast, and it does help, and is relatively accurate; and then you make them pay for another 5-day forecast after that. Lather, rinse, and repeat.
But everybody in finance was already doing that; and almost everybody still failed to predict the seminal financial event of the past decade.
I’m fond of John Mueller’s work called “Redeeming Economics” (‘redeeming’ sort of meaning ‘salvaging’). He makes the case that economic analysis demands studying the interactions of four basic variables, whereas Adam Smith (arbitrarily) reduced the number to two, and his reformers only made it to three.
So even aside from Matt’s case that we are, in economics as well as practically all else, drastically over-confident (or not suitably humble) about our predictive skill, if a field is supposed to be studying interactions in four variables, yet (studiously, as it were) limits itself to interactions of two variables, or at best three, you’re gonna have some issues about the quality of your work.
An economist, in my opinion, is but an accountant free from the irksome constraints of even “creatively” making the figures seem to balance. Why would anyone who is comfortably enjoying wealth and notoriety with speculative babble that can’t be right or wrong… it only needs to be what someone wants to hear… want to be bothered with tiresome reality?
Economy, as Briggsy alluded, is the production, distribution, exchange and consumption of goods and services. Money is not a producer, or fuel, or propellant; it is (or should be) merely a lubricant making economic activity more convenient. That some crafty thieves have perverted the system so that they can claim what is not their rightful due is an error born of greed and megalomania.
You might as well call economics (or sociology, or psychology and lots of similar “ologies”) “science” since most “science” is degraded into a scientism not constrained in the slightest by such an antiquated straightjacket as a scientific method.
What is marketed as “philosophy” has gone much the same way. It is no longer a method of investigation such as the Aristotelian/Scholastic Method but a mere sophistry for rationalising fancies. Benedict XVI put it rather tellingly. He doesn’t like Scholasticism because it’s “too rigid”. Apparently, it’s not acceptable for fancies to be limited by mere logic, consistency or reality.
I worked for a credit counseling agency that went broke. Enough said.
The exposition also perfectly analogizes climate modeling, to wit: “… built on assumptions with dubious connections to the real world but nevertheless has conclusions that are uncritically applied to understanding our [climate] … [along with] the unfounded argument that climate models should have equal standing [with data] …, and by misplaced appeals to … assumptions that are “standard in the literature,” … [and to inadequate 19th century physics].”
It seems the poison is everywhere these days.
An Economist is an ideologue who likes numbers.
Economics Professor, Joan Robinson: “The purpose of studying economics is … to avoid being taken in by economists.”
Thanks for this post, and especially the link to Dr. Pfleiderer’s paper. I did a post inspired by it, and making the link to climate science.
“Mathematics may be compared to a mill of exquisite workmanship, which grinds you stuff of any degree of fineness; but, nevertheless, what you get out depends on what you put in; and as the grandest mill in the world will not extract wheat flour from peascods, so pages of formulæ will not get a definite result out of loose data.”
Thomas Henry Huxley, Quarterly Journal of the Geological Society of London 25: 38, 1869.