Does Excessive Quantification

Diminish the Social Sciences? The Case of

Economics

Joshua FarleyCommunity Development and Applied Economics

Gund Institute for Ecological EconomicsUniversity of Vermont

OverviewMath has brought rigor to economics, but also mortis

In their effort to become a quantitative science, economists have had to strip out the most interesting issues in economics, for very low returns.

The axiomatic assumptions underlying the quantification of economics, or any other social science, hide strong ethical assumptions with which most people would not agree.

Economists frequently use inappropriate models, and come to believe the models over reality.

Economic systems are continually evolving. Novelty and surprise are omnipresent in reality, but impossible within an analytical mathematical framework.

Not an issue of sour grapes

Quotes "Page after page of professional economic journals are

filled with mathematical formulas leading the reader from sets of more or less plausible but entirely arbitrary assumptions to precisely stated but irrelevant theoretical conclusions.....Year after year economic theorists continue to produce scores of mathematical models and to explore in great detail their formal properties; and the econometricians fit algebraic functions of all possible shapes to essentially the same sets of data without being able to advance, in any perceptible way, a systematic understanding of the structure and the operations of a real economic system" (Leontief, 1982, p. 104).

". . . economics has become increasingly an arcane branch of mathematics rather than dealing with real economic problems"Milton Friedman

“[Economics as taught] in America's graduate schools... bears testimony to a triumph of ideology over science.” Joseph Stiglitz

“We live in an uncertain and ever-changing world that is continually evolving in new and novel ways. Standard theories are of little help in this context. Attempting to understand economic, political and social change requires a fundamental recasting of the way we think” Douglass North

What is Economics?Allocation of scarce resources among alternative

desirable ends

“Desirable ends” is inherently normativeQuantification demands that desirable ends be

quantifiable in cardinal numbersOptimization demands that all desirable ends be

measurable in same unitHuman wants are varied and ordinal, not cardinal

Focus on Essential Resources

Essential implies there are no substitutes

E.g. Food, fossil fuels (in short run), ecosystem services

Strong sustainability

The approach to quantification made by economists denies the notion of essential resources

Economist do accept inelastic demand

Origins of Mathematical Approach

17th century science: mechanical physics

Deism

Jevons: "The Mechanics of Utility and Self-interest.”

Normative Assumptions Underlying “Positive”

Science

From Utility to Monetary Value

Utilitarian origins

Diminishing marginal utility, distribution, Pareto efficiency

Revealed preferences and monetary value Food Eflornithine Water With highly unequal purchasing power, do markets

maximize or minimize utility?

Willingness to pay and non-market goods

Sustainability and Justice on same moral plane as preferences

Valuing the FutureDiscount rates and mathematical tractability

Exponential or hyperbolic discounting

Stern review and Nordhaus critique

Human BehaviorRational, self-interested

SS #s and auctionsContingent valuation

Interpersonal utility

Cooperation and institutions

Should we use Math?What Math should we

Use?

Is Math Appropriate?

Dialectical concepts

Analytical concepts

Evolutionary change

Do Economists Understand Math?

Exponential Growthhttp://www.youtube.com/watch?v=qT4HCfDPOnY

Fitting data to mathematical functionsSingularity

The Production FunctionLabor, Capital and Cobb-Douglas

Georgescu-Roegen’s critiqueStock-flowFund-service

Stiglitz-Solow solutionPerfect substitutabilityWeak sustainabilityStock-flows required to sustain Fund Service

Complex or Simple System?

Equilibrium economics and negative feedback loopsHow do prices achieve equilibrium?

Real-life and positive feedback loops

Pre-conditions for speculationConcentrated wealth Inelastic supply Inelastic demand

Emergent phenomena and surprises

Is it science?Is the mah done correctly?

Is it replicable?

Is it worth it?

ConclusionsMath is a useful tool

Engineering type problems Insights into problems

Most interesting economic issues not suitable for math

Fallacy of misplaced concreteness is serious danger

Were Smith, Mills, Marx, Veblen, Keynes, Galbraith, Boulding and Daly economists?

What have mathematical economist contribute?

What is the cost of ignoring non-mathematical approaches?