On the irrelevance of formal logic in economics
from Lars Syll
In the case of substantial arguments, however, there is no question of data and backing taken together entailing the conclusion, or failing to entail it: just because the steps involved are substantial ones, it is no use either looking for entailments or being disappointed if we do not find them. Their absence does not spring from a lamentable weakness in the arguments, but from the nature of the problems with which they are designed to deal. When we have to set about assessing the real merits of any substantial argument, analytical criteria such as entailment are, accordingly, simply irrelevant … ‘Strictly speaking’ means, to them, analytically speaking; although in the case of substantial arguments to appeal to analytic criteria is not so much strict as beside the point … There is no justification for applying analytic criteria in all fields of argument indiscriminately, and doing so consistently will lead one (as Hume found) into a state of philosophical delirium.
The mathematization of economics since WW II has made mainstream — neoclassical — economists more or less obsessed with formal, deductive-axiomatic models. Confronted with the critique that they do not solve real problems, they often react as Saint-Exupéry‘s Great Geographer, who, in response to the questions posed by The Little Prince, says that he is too occupied with his scientific work to be be able to say anything about reality. Confronting economic theory’s lack of relevance and ability to tackle real probems, one retreats into the wonderful world of economic models. One goes into the “shack of tools” — as my old mentor Erik Dahmén used to say — and stays there. While the economic problems in the world around us steadily increase, one is rather happily playing along with the latest toys in the mathematical toolbox.
Modern mainstream economics is sure very rigorous — but if it’s rigorously wrong, who cares?
Instead of making formal logical argumentation based on deductive-axiomatic models the message, I think we are better served by economists who more than anything else try to contribute to solving real problems. And then the motto of John Maynard Keynes is more valid than ever:
It is better to be vaguely right than precisely wrong