Economics without mathematics

By Felix Salmon
April 1, 2010
Justin Fox sums up the overwhelming majority of economics papers in one sentence:

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Justin Fox sums up the overwhelming majority of economics papers in one sentence:

The basic form of an academic economics paper is a couple of comprehensible paragraphs at the beginning and a couple of comprehensible paragraphs at the end, with a bunch of really-hard-to-follow math or statistical analysis in the middle.

What he doesn’t (need to) mention is the way that journalists, myself included, read economics papers: we generally have no ability or inclination to try to understand the details of the formulae and regression analyses, so we confine ourselves to reading the stuff in English, and work on the general assumption that the mathematics is reasonably solid.

The problem of course is that we really have no basis for making that general assumption: we make it not because we think it’s particularly justified or justifiable, but because we don’t have any choice. What’s more, because we’re always interested in what’s new, and because we have easy access to the internet and little access to expensive journals, we gravitate to preprints at sites like SSRN, rather than papers which have gone through peer review.

I worry about this. The blogosphere is full of interesting debates between people who understand and respond to what everybody else is saying. But the minute that economic papers get cited, the degree of understanding plunges, and most bloggers and journalists are cowed by all those equations into simply assuming that it all stands up somehow.

There’s no easy way around this problem, but at the very least it should probably be much more out there in the open than it is. No one likes admitting ignorance, but the blogosphere would be a better place, I think, if we all did so more regularly, especially when it comes to the nuts and bolts of economic analysis.

On the other hand, maybe the general assumption is justified. Any economists care to weigh in on the frequency with which important problems in an economics paper are buried in the math?

Update: An Econ grad student writes to Andrew Sullivan:

[U]nderstanding the math lets you realize how narrow the analysis is and how stylized the world depicted by the model has to be for its conclusions to follow. As descriptions of the world, they’re metaphors; but without the math it’s hard to show someone where the metaphor holds and where it’s just an analogy not to be taken literally.

Update 2: Robert Waldmann writes:

The sloppy translation of “Pareto efficient” to “efficient” has caused huge damage…

However, things are much much worse than you imagine. It is not rare for the plain English parts of articles published in top journals to contradict the statistical analysis presented in the body of the paper. I absolutely assure you that it is not rare for the abstract introduction and conclusion to state that a hypothesis has not been rejected when the empirical results include rejection of that hypothesis.

Update 3: Mike Mandel says that “the real joker in the deck is not the mathematics, but the data.  Or more precisely, the lack of good economic and financial data in many areas.” Although it’s unclear whether this results in incorrect papers, or just in the absence of good and important ones.


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I’m flabbergasted that yourself and other significant economics journalists aren’t trained in economics. I have been a technology journalist, and am a technologist first. You don’t need a degree in English or journalism to communicate, but you do need to be able to participate in the discussion of your subject matter with those who are doing the work at a significant level of understanding.

Not even regression analysis? Sigh.

Posted by Curmudgeon | Report as abusive


Posted by Monetarius | Report as abusive

I’m an economics PhD student, so I’ll chime in. There are really two types of potential problems that numeracy can help with as you consume economics papers.

One is in the statistics. A good empirical paper has to make the case that it is identifying causation, not mere correlation, and certainly not spurious correlation. This is tricky, but while coming up with ways to do it can be hard, the techniques and ideas deployed in most papers are fairly simple. Anybody with a college education could take 1-2 introductory applied econometrics courses and get a lot more out of these types of papers. At the graduate level you just do the same techniques over again, but derive them from scratch — not necessary if you just want to read economics.

The more theoretical stuff is more difficult to read without advanced mathematics, and the problems are different from empirical problems — but understanding the math lets you realize how narrow the analysis is and how stylized the world depicted by the model has to be for its conclusions to follow. As descriptions of the world, they’re metaphors; but without the math it’s hard to show someone where the metaphor holds and where it’s just an analogy not to be taken literally.

Posted by Mr_Me | Report as abusive

If you think interpreting stats is a problem in econ, try medical science.

Posted by Falstaff | Report as abusive

The issue is not that there are mistakes in the math. The issue is that the math often reveals the strong simplifying assumptions that are needed to get the math to show that the conclusions follow from the premises. Often these simplifying assumptions are barely discussed once the math gets going, because it is obvious that’s what you need to get it “to work.” But they are often glossed over in the plain language discussion of what the paper is showing, thereby hiding the very narrow set of conditions under which the conclusions hold.

Posted by jbs940 | Report as abusive

I think we would all prefer that journalists were experts in the sense of having graduate degrees or extensive industry experience in whatever they cover, but most of the time, it’s just not feasible. For one thing, I think you vastly overestimate the ability of the typical expert (especially in technical fields) to communicate with non-experts. Another thing is that it may not be worth the effort for experts working in the field to write for a broad audience. It takes a lot of work to build that audience and while some experts, like Krugman, are willing to go to the trouble, most aren’t and that leaves a lot of ground uncovered. So I’m glad there are guys like Felix to cover some of that ground and offer good insight.

Posted by hostile17 | Report as abusive

I’m don’t have a PhD in Economics. Economics always has been a social science and as such should limit itself to finding r values from unbiased data and guessing at its meaning. That said, most economics is bs clothed in mathematics.

If consumers begin to be fearful and conserve the government takes action to overcome this mental condition. How? Expand credit. If consumers then become to euphoric and spend to much the government takes action to overcome this mental condition. How? Restrict credit. Consumers spend very little time in the middle.

Mathematics should be left to explain the physical world, not psychosis.

Posted by csodak | Report as abusive

Not even regression analysis? Sigh. Mathematics should be left to explain the physical world, not psychosis. Academics have to write papers to retain their jobs, even if they have to plagiarise.

Beats me how you can predict the future from past information, or informatics…

Let’s forget Einstein quotes about intellectual ruts, let’s face it, 2-Towers changed economic fundamentals.

Posted by Ghandiolfini | Report as abusive

You should also worry that the maths are there on purpose, for obfuscation purposes.

You know, when Taleb says they’re charlatans, he’s not joking. So, you can guess that peer-review aint no guarantee of nothing. 3 charlatans reviewing a 4th one. LOL!

If you’re still in doubt, read Chapter 2 of Yves Smith’s Econned. Those guys aren’t here to do science, they’re here to justify the “free markets” mantra. Economists are as despicable as the oligarchs that fund them.

Felix, you seem like a guy who enjoys life. You don’t post late at night or on weekends like Yves Smith. Trust me, don’t waste your time on economics papers. You’ll thank me later.

Posted by EmilianoZ | Report as abusive

Earlier in my career I used to read a lot of academic finance papers looking for practical investment ideas and found that what Mr_Me and jbs940 say is true. It’s not the math that’s the problem (in fact, often the more complicated the math the less real world the paper’s applications), it’s the data set and the assumptions. Besides the intro paragraphs I would also read the first few paragraphs after those in which the data set and assumptions are described. This saved me a fair amount of time and effort because often the data set is flawed or too short, or the assumptions are so simplifying that you can’t draw any conclusions (or any you would bet money on) about the relevance of the findings to the real world.

Posted by pereubu77 | Report as abusive

Economics led by Simon, Friedman, Greenspan and others was portrayed as a science, but Taleb and others have blown up this idea by showing that the math was mostly poached from physics and misapplied in the area of economics.

The results aren’t surprising, especially when you factor in the criminal element that discovered that once Reagan “freed” the banks the easiest way to rob one was to own it.

Paulson, Blankfein, Dimon are really the Al Capones and “Baby Face” Floyd of our times, dressed in the best suits while stealing grandma’s pension.

Posted by jstaf | Report as abusive

Salmon, you’re a smart guy, you should be able to learn the math pretty easily. It looks a lot harder than it is… The hard part is explaining it to everyone, which you’re already good at doing…

Posted by magicrf | Report as abusive

confession of a economic journalist…next you’ll be telling us you can read just fine without your glasses. You don’t need to understand mathematics to understand Americans have traded their sovereignty for a paycheck. We live in a world defined by Schrodinger’s cat paradox. Is the free market alive or dead…well that is based on the observers reality and the observer is corporate america.

Posted by csodak | Report as abusive

I was originally trained as a psychologist, which was uncertain enough of itself as a science to put a lot of effort into experimental design and data analysis. I would like to think that the math behind economic research is conducted with similar seriousness and an acknowledgement of its limitations.

But yes, I strongly believe that anyone communicating to a broader audience on a technical subject (including economics) have the background to engage practitioners on the terms of the field, not necessarily as an equal, but at least as a willing and able student of the subject. Anything less does a disservice to the readership.

Posted by Curmudgeon | Report as abusive

There’s an interesting paper by Andrew Lo, from MIT, about economists’ physics-envy:

The paper goes into some detail about economists’ fetishization of mathematics. Rather interesting.

Posted by DaveFriedman | Report as abusive

The derivation of R-squared is an undergraduate course at best – not even a senior-level course at undergrad. Black-scholes is a first-order equation.. again, no intellectual heft required. The simplifying assumptions are archaic enough that when the math gets difficult, it’s irrelevant!

Example: Stock prices are NOT iid. Have never been. If some information change impacts a price quoted at some time, the independence assumption requires that the next quote be just as likely to be lower as it is higher!

Posted by Unsympathetic | Report as abusive

1) Second what Mr_Me, jbs940 and pereubu77 (fd: I love ‘Non-Alignment Pact’) say. 90% of the time the problem is in the assumptions or the data, not the derivation or the curvefitting. The other 10% are John Lott.

2) Andy Lo is always worth reading, and would be worth any journo’s while in cultivating as a quick-reaction-to-X source.

3) The math in most of these papers is not that dauting. Confront the basics. Just stay away from classwork designed for dummies: the worst class I ever took was an applied regression course at a ‘good’ stats department designed for non-stats doctoral students. Waste. Of. Time.

Posted by wcw | Report as abusive

lets not pollute finance with economics.

Posted by csodak | Report as abusive

I strongly agree.

This lack of depth/capacity/interest on the part of journalists is further compounded when they report the exciting and controversial news highlighted in certain studies: “Stimulus Dollars Awarded Overwhelmingly to Democratic Districts” but don’t know enough to unpack the quality of the underlying work, or see potential ideological bias (see Nate Silver’s take-down (today) of Veronique de Rugy’s work on the stimulus:

Nor do the vast majority of journalists seem to concern themselves with the disagreements within the economics, or other academic, fields. (Global warming being the major exception, because the disagreement *is* the news)The timeframe for those discussions and disagreements is measured in years (as papers and counter-papers are published). The news cycle is measured in minutes, hours and days. Sometimes when a new consensus is reached, or an important critique offered or agreed to, it’s too late, as the popular meme is well established. For an example, see Angus Deaton’s take-down of Randomized Controlled Trials as the “gold standard” of effective poverty reduction and economic development: ds/Instruments_of_Development.pdf

Posted by build_assets | Report as abusive

I have to agree with Curmudgeon. Yes, requiring journalists to be certified in the fields they report on is unwieldy, clumsy, horrifyingly full of paperwork, and probably would disqualify the vast majority of journalist working in the field. But that’s not to say it isn’t worth it.

Every commentator here, including Felix, has been driven crazy by reporting that barely passes as drivel. Sometimes that’s just chalked up to genuine disagreement, but often it’s because reporters lack the basic technical skills to distinguish truth from falsehood within their field of expertise. That’s an astonishing amount of ignorance from an industry that’s tasked with providing information.

On one hand, we complain that average people can’t distinguish good from bad information when forming their opinions – on the other, we excuse a sometimes appalling lack of knowledge from the reporters who claim to inform them.

Posted by strawman | Report as abusive

This explains how Justin Fox could write that book. He doesn’t understand economics!!

It should not be a surprise that journalists cannot understand economics. Economists cannot write very well. We all have our specialties, though economists recognize that they ought not to write books about journalism.

If you even tried to teach what is really going on in a paper you would know that the mathematics is typically essential, and figuring out what is going on takes time and thought, not skimming.

Posted by bwickes | Report as abusive

The reference to Black Scholes reinforces the point about assumptions. It assumes stock prices are purely random, with some volatility. If a company said, “we assume our stock price will vary about some mean with some standard deviation, with no upward trend” what would the options really be worth? Options only have value with the assumption the stock price will go up. Granted, employees work towards making the stock price go up, but that needs to be a goal. If that’s the goal, then B-S is BS.

Posted by winstongator | Report as abusive

Economics doesn’t pollute finance…it runs in the other direction. Finance makes money off of economics, flawed or real. Accountants chart what finance does. Economists then look at the numbers, try to explain what goes on, the financiers look at the economics and continue to make money off it all, ad infinitum.
At the center of it all is the politicians who don’t understand any of it, but muck it all up regardless.

This is the cycle of money. Make money, track money, explain money, make more money.


Posted by REDruin | Report as abusive

The jobs report this Friday is expected to show +200k new hires

Posted by Story_Burn | Report as abusive

Digression on Seduction by Mathematics by two eminent Mathematicians:

As far as the laws of mathematics refer to reality, they are not certain, as far as they are certain, they do not refer to reality.- Albert Einstein

Pure mathematics consists entirely of assertions to the effect that, if such and such a proposition is true of anything, then such and such another proposition is true of that thing. It is essential not to discuss whether the first proposition is really true, and not to mention what the anything is, of which it is supposed to be true … If our hypothesis is about anything, and not about some one or more particular things, then our deductions constitute mathematics. Thus mathematics may be defined as the subject in which we never know what we are talking about, nor whether what we are saying is true. – Bertrand Russell

My 2 cents: Math is only as useful as the qualitative definitions upon which it is based, are accurate.

Posted by Dharma_Dude | Report as abusive

TLDR version:

“Halp! I’m stoopid and demand the rest of the world be as stoopid as me so that when I babble, I actually have a chance of being right!”

Posted by sherifffruitfly | Report as abusive

Dear Felix. This is a brilliant post. Yes indeed, the problem with higher economic theory is that it consists of mathematical results based on very strong assumptions. Also the conclusions are weaker than they seem. The sloppy translation of “Pareto efficient” to “efficient” has caused huge damage.

I was just talking about this about 10 minutes ago.

However, things are much much worse than you imagine. It is not rare for the plain English parts of articles published in top journals to contradict the statistical analysis presented in the body of the paper. I absolutely assure you that it is not rare for the abstract introduction and conclusion to state that a hypothesis has not been rejected when the empirical results include rejection of that hypothesis.

Often the plain English parts of papers exclusively reflect the preferences of the author(s) and are unrelated to the evidence or mathematics in the paper.

It is not widely known that the assumption of complete contingent claims markets is generically necessary for the result that market equilibrium is constrained Pareto efficient. People who discuss financial engineering and assert that general equilibrium theory suggests that laissez faire is optimal are like people who claim that 2+2=5. They are making a mathematical mistake. Generically laissez faire is optimal only in the case that all financial instruments exist already. There is absolutely no presumption at all from general equilibrium theory that preventing a financial innovation can be assumed not to be Pareto improving and there is an (almost always except for economies in a set of measure 0) result that there is a restriction of free exchange between rational agents in perfectly competitive markets which makes everyone better off.

Posted by robertwaldmann | Report as abusive

For the sake of accuracy, the following statement in an above post should be corrected:

“Options only have value with the assumption the stock price will go up.”

One does not need the assumption that the stock price will go up (drift > 0) for options, both call and puts, to have value. If a stock does not have much drift or zero drift, the options still have value, primarily because of volatility, and to a lessor extent on the risk-free rate. %93Scholes

As seen in the above reference, the price of a European call or put only depends on the risk-free rate and the volatility of the stock price (the other variables that are in the BS equation are known at the time of the option trade, i.e. the current stock price, S; the stock strike price, K; and the time to expiration, (T-t).

On the time scale of most options, the volatility of a stock is much more important than the risk free rate

Note: everybody trading in options will generally agree on the risk-free rate and therefore generally the only disagreement among traders is the appropriate volatility to use. That is why traders often speak of buying or selling volatility (buying options when one thinks volatility is low (and will go much higher before expiration)and selling options when one think volatility is high and will go lower)

Posted by high_al | Report as abusive

A good post and an important point.

It should be noted that many wise elder statesmen in the world of finance and investing, from Warren Buffett and Charlie Munger to Jeremy Grantham and company have a heaping dollop of scorn for those who would apply advanced math to things financial.

Posted by DanHess | Report as abusive

You are all much smarter than I am so maybe someone can explain why economists have such complicated explanations and formulas for something as simple as exchanging money for a product or service.

I’m no rocket scientist but isn’t our economy just about buying and selling “stuff” and maybe earning some interest?

Shouldn’t these things be discussed in plain language? What is the purpose of all of this (at least as I see it), over complication?

Posted by Benny_Acosta | Report as abusive

The reason I’m asking this is because the other day I was on the phone with a customer service rep from Chase credit cards. In February we paid our balance in full (IN FULL mind you). And yet we were told we owed them interest for the rest of the month that the statement was due. We paid off the card before the due date.

So here I am thinking that paid in full means PAID IN FULL, but I’m told that even after making a payment IN FULL, I still owed interest because the month wasn’t up yet. WTF?

I will never do business with Chase again. I’ve never been a fan of credit cards but this was just down right stupid. And this isn’t the first time. I had another Chase card (my wife and I each had our own), and after I paid off my balance they tried to charge me interest a full month after my account was paid off. Again WTF? Is theft the only purpose the field of economics serves? Or maybe I’m just confusing one subject with another.

Posted by Benny_Acosta | Report as abusive

Galbraith had a great chapter in Economics, peace and Laughter. He esentially said that economist use big words to communicte EFFECTIVELY.
Here is what he said about math and economics:

In his book Economics Peace and Laughter (1971), Galbraith explained the role of mathematics in economics with the passage,

“The oldest problem in economic education is how to exclude the incompetent. A certain glib mastery of verbiage,the ability to speak portentously and sententiously about the relation of money supply to the price levelis easy for the unlearned and may even be aided by a mildly enfeebled intellect. The requirement that there be ability to master difficult models, including ones for which mathematical competence is required, is a highly useful screening device.”

It can be done with out math. Look at David Ricardo and Adam Smith, for example.

Posted by TrentRock | Report as abusive

I should have been clearer. If a company says, our stock price has no upward drift, there is no real reason for them to issue options to employees. I understand they have ‘value’ but it is a speculative value based on volatility, not one based on a fundamentally growing stock price.

This is similar to the tax treatment. That options were not an expense to the company but a huge boom to employees shows that one side was not being truthful about the argument.

For the record, I think companies should not use B-S to model option expense, but carry them as liabilities.

Posted by winstongator | Report as abusive

I became aware of the Austrian school of economics after reading the works of Ludwig von Mises and Fredrick von Hayek recommended in The Objectivist Newsletter in book reviews of their works by Ayn Rand. The Austrian school was founded by Carl Menger a professor in Vienna who was attempting to identify the laws of the marketplace when the government limited itself to making sure that all interactions by market participants were only by mutual consent, without initiation of force nor fraud. Eugen von Baum-Bawerk was another early member of the Austrian school and von Mises was a student of Menger who went on to publish several books including Human Action, Socialism, Bureacracy, Planning for Freedom, Planned Chaos, The Anti-Capitalist Mentality and numberous articles.

When I was stationed in S.Korea in the military in 1970 an opportunity arose. I encountered two officers in the U.S. Army who had both received Ph.ds in Economics from Harvard and were serving out their military obligation. I decided to ask them a couple of questions with their permission, as I was an officer too.

First I asked them if in their pursuit of their advanced degrees they had encountered the works of Paul Samuelson, Robert Heilbroner, John Maynard Keynes and John Galbraith, all exponents of interventionist policies and writers of the textbooks being used in colleges and universities. Of course they had heard of them and were familiar with their works.

Then I asked them if in their studies they had been made aware of the works and ideas of Ludwig von Mises, Carl Menger, Eugen von Bahm-Bawerk, and Frederick von Hayek, the latter of whom went on to win a Nobel prize in Economics. To my surprise they had never heard of any of them at all in all their years of studies in Economics!

In other words they were well versed in the various ways in which a government could intervene in the activities of the marketplace, all with “good intentions” no doubt, but were totally unaware of an entire school of thought regarding how the free market works in which no government intervention is permitted at all.

Economics is not my field. I am a practicing psychiatrist after graduating from a technical high school and three years of engineering school. I was also horrified by the irrationality of the Freudians and the Behaviouralist schools but fortunately encountered the works of Nathaniel Branden, Ph.d in psychology.

You would have to search for a mathematical formula in the works of those luminaries of the Austrian school mentioned above. George Reisman has written a text entitled Capitalism: A Treatise on Economics and there is a Ludwig von Mises Institute online where all of his works as well as those of Murray Rothbard can be found

Peter Schiff, who predicted the economic crisis well in advance, advocates the Austrian school, as does Congressman Ron Paul, M.D., Obstetrician, of Texas,, and his son Rand Paul, M.D. Opthalmologist, who is ahead in the running for U.S. Senator from Kentucky.

Schiff is running for U.S. Senate in Connecticutt and is quite visible in the financial community and founder of EuroPacific Capital,

Ayn Rand who wrote Atlas Shrugged also penned the ethical case for the free market in The Virtue of Selfishness and Capitalism: The Unknown Ideal and For the New Intellectual.

A is A might qualify as a tenet of her philosophy as well as her admonition to Check Your Premises.


Posted by galtgulch | Report as abusive

@Benny – The purpose of mathematics in economics (as in any science) is to model a problem of sufficient complexity so that the model has explanatory or predictive powers. We tend to start by modeling simple things (I modeled a variant of the Prisoner’s Dilemma game years ago in my psychology thesis). If we can show that simple things can be modeled accurately, that gives us confidence that we can build up to modeling more complex aspects of the field.

This discussion is focusing on two aspects of mathematics in economic research and exposition. First, does the mathematics used accurate represent the problem being explored? Second, is it possible for a journalist to reasonably explain such an exploration to a larger audience without an understanding of the mathematics used?

As I’m not an economist, I have no opinion on the first question. As a sometimes journalist, I feel strongly that a journalist who doesn’t take the effort to understand the underlying mathematics of a paper has no business trying to explain that paper to others.

Posted by Curmudgeon | Report as abusive

If a person has worked their way along to become an “ex-pert”, what were they when they were still a “pert”?

Posted by gates1588 | Report as abusive

The real problem with advanced math and fancy models is that it lets people deceive themselves into believing that they know much more than they do.

We saw this in abundance in the recent crisis. Any eighth grader could have done better lending than the banks did in the years leading to the crisis, just going on the common sense that you don’t lend to someone who doesn’t have a way to pay back the loan. But with elaborate models, very smart people at very big banks convinced themselves that everything would be alright.

The elaborate models and advanced math actually tend to lead people to turn off common sense and this can be disasterous.

Slow learners that we are, folks are handing the climate debate over to some computer models and the models’ handlers rather than
using common sense and actual temperature readings.

Posted by DanHess | Report as abusive

Dungeon, there is no model that can predict world economics, as no one can predict wars or have stats on illicit trades, or for that matter, the weather.

196 countries, at least 10 major religions, 10 superpowers, 10 useless ‘New World Order’ regulatory bodies (shiver), you are buggered before you start.

Felix is correct, ‘Alchemy Wine Economics without mathematics.’

Posted by Ghandiolfini | Report as abusive

The advanced mathematical models used to explain simple every day human behaviours in the market place often distort the facts of the matter.

“DanHess – But with elaborate models, very smart people at very big banks convinced themselves that everything would be alright”.

The point? there is no issue with todays journalists not being able to interpret the fine details of the formula. However, the ability to understand the depictions of the formula and the way it fits into the model is critical.

Posted by johnpaulperic | Report as abusive

I agree with EmilianoZ above, you should check out Yves Smith’s book on how economists have used contrived mathematical arguments to market as science what in the end is not more than an fundamentalist, free market ideology.

I remember you disagreeing with her on a TV interview not too long ago about whether economists played an important in the current financial meltdown, but she didn’t quite address the math issue as she does in the book, which would have clarified matters in the discussion.

Posted by AlanFurth | Report as abusive

Well, did Buffet advisors not warn us about the derivative time-bomb, and possibly securitized mortgage books ? We make it so complex, and when we are not quite so sure about our gambling outcomes, we hedge them.

Benny is quite right, it is all about supply and demand, interest, but add dividends and all around capital growth or losses, after taxes. When credit demand exceeds credit supply, paper money has to be ‘printed’, or created. When consumption exceeds supply, you have to import it.

By the same token, we don’t even know what ‘earnings’ means anymore, that’s a sorry state of affairs.

Galtgulch, that sound more like science fiction man, in fact, like the names of the Space Shuttle crew taking off at 3am, EST ? Ayn Rand being shot into space. Rather give me an actuary, or conversely, the Mafia anytime.

Posted by Ghandiolfini | Report as abusive

…or Timothy Leary, at least you know what your are dealing with…

Posted by Ghandiolfini | Report as abusive

I have not read all the previous comments but I’m with Felix on this one.

A broader point is that 95% of economists are basically clueless (monetarist or Keynseian,they’re all the same). Much of their output is glorified speculation and quackery.

Having either misinterpreted or failed to read their Adam Smith, members of the laissez-faire, Chicago school that has predominated since the late 1970s swallowed hollow Randist doctrine and must bear alot of responsibility for the mess that we are currently in.

For an insight into the cluelessness and herd-like ignorance of most economists, take a look at this excellent blog post by Adam Curtis and the film that follows it. 10/02/the_economists_new_clothes.html

Posted by IanFraser | Report as abusive

Late hit here, but it seems that comments keep coming, so…

You need to go back even further, as this is really an epistemological problem. How do we know what we think we know?

Many of the posters here have a bias towards Thomistic Rationalism, which was all the rage a couple of centuries ago, and still dominates much of our thinking. They appeal to authority first (Jesus, the Gospels, Hayek, Smith, et al), then reason (it *seems only rational*), and only in the end, empirical data. Sadly, much of Economics is based on flawed rationalism with some math thrown in. They then lay claim to some [pretty dodgy] empiricism. Causal links may be weak, but that doesn’t stop economists from trying on the cloak.

You can understand all of that without the semesters of calculus plus some diff-eq, but you probably ought to go back and brush up on your algebra anyway. None of it reliably predicts the future, and little of it allows you to pick a profitable stock. Business is seat of the pants. All the time.

Posted by ARJTurgot | Report as abusive

I think you misunderstand what maths is for:

Maths says if I assume this and this is true then these following things must be true too. It says nothing about your assumptions validity except to say that if some of the derivations are shown to be false then at least one of your assumptions is false.

Maths in important because it makes your assumptions precise, it makes the logical path to your deductions precise and it makes the results precise. Without the maths you get lost in the subtle differences of meaning of common day usuage and if nothing else the recent crisis should show that the devil is in the subtle differences and assumptions.

As for the comment from Adam Curtis, I think this reductio ad absurdum of what happens when people who are clueless about maths start attacking a field. Why should economists have predicted THIS crisis? What constitutes a prediction? The day and hour? The amount lost? The products that lost money? That there would be a crisis? I hereby predict at sometime in the future large amounts of money wil be lost on products that previously had been considered perfectly safe. Can I collect my Nobel prize? The whole point of the EMH which Mr Curtis is attacking is that you CAN’T predict the future. What you can predict is population level behaviour. I can’t predict exactly when a fair coin will come up with 4 heads, does that mean we should throw out probability theory?

As for journalists understanding the maths, the key bit is not the symbology but the assumptions being expressed and their mapping to the real world.

Posted by Danny_Black | Report as abusive

Enjoy a light take on econ gurus:-

Post: Hayek vs Keynes rap

Posted by Stuartt | Report as abusive