How Mathematical Economists Overreach

by Mario Rizzo

In recent months there has been a discussion both in the traditional media and in the blogosphere about why orthodox macroeconomics failed to predict or explain the financial crisis and the subsequent Great Recession. Some of that discussion focused around Paul Krugman’s criticism that economics mistook  (mathematical) beauty for truth. Subsequently, there was a further discussion about the role of mathematics in economics.

Of course, this is a big topic. My task here is only to investigate, by means of a simple example, three claims made for the superiority of mathematics over ordinary (natural) language. Continue reading

The Death of Paul Samuelson and Selection Bias

by Mario Rizzo  

Paul Samuelson has died at the age of 94. There is already a big New York Times obituary lauding his many contributions and more will inevitably follow. Many economists will want to use this occasion to demonstrate how much they appreciate economics as a science and how this appreciation transcends ideological divides. This will reassure them that all is well in the queen of the social sciences.

Of course, I’d like to strike a discordant note. Continue reading

A triple whammy for Austrian economics

by Sandy Ikeda

An article appeared in the Arts section of last Thursday’s New York Times called, “Ivory tower unswayed by crashing economy.” I found three things in particular that were dismaying about it.

The reporter argues that academic economists have been slow to change their minds about the virtues of the free market, in spite of recent events, when she says,

Free market theory, mathematical models and hostility to government regulation still reign in most economics departments at colleges and universities around the country.

So, first, is the common bromide that the free market is primarily responsible for the economic mess we’re in. But what I find almost as disturbing is the way she tacitly equates free-market economics (leave aside for a moment the appropriateness of the term) with mathematical economics and in particular neoclassical mathematical economics.  This is something I’ve encountered a lot lately. Continue reading