Real-World Economics Review Blog

Noah Smith — confusing mathematical masturbation with intercourse between research and reality

from Lars Syll

There’s no question that mainstream academic macroeconomics failed pretty spectacularly in 2008 …

Many among the heterodox would have us believe that their paradigm worked perfectly well in 2008 and after … This is dramatically overselling the product. First, heterodox models didn’t “predict” the crisis in the sense of an actual quantitative forecast.

This is because much of heterodox theory is non-quantitative. Basically, people write down English words explaining their conceptual ideas about how the economy works. This describes the ideas of mid-20th-century economist Hyman Minsky, who wrote books and essays about the instability of the financial system. Minsky, though trained in math, chose not to use equations to model the economy — instead, he sketched broad ideas in plain English …

At the end of the day, policymakers and investors need to make quantitative decisions — how much to raise or lower interest rates, how big of a deficit to run, or how much wealth to allocate to Treasury bonds.

Noah Smith

Noah Smith — like so many other mainstream economists — obviously has the unfounded and ridiculous idea that because heterodox people like yours truly, Hyman Minsky, Steve Keen, or Tony Lawson, often criticize the application of mathematics in mainstream economics, we are critical of math.

I don’t know how many times I’ve been asked to answer this straw-man objection to heterodox economics– but here we go again.

No, there is nothing wrong with mathematics per se.

No, there is nothing wrong with applying mathematics to economics.

Mathematics is one valuable tool among other valuable tools for understanding and explaining things in economics.

What is, however, totally wrong, are the utterly simplistic beliefs that

• “math is the only valid tool”

• “math is always and everywhere self-evidently applicable”

• “math is all that really counts”

• “if it’s not in math, it’s not really economics”

“almost everything can be adequately understood and analyzed with math”

So — please — let’s have no more of this feeble-minded pseudo debate where heterodox economics is described as simply anti-math!

No real problem worth solving can be solved without some basic research. Therefore the engagement of faculty and students on real problems yields basic research problems whose solutions are of practical significance. Furthermore, the validity of these solutions can be tested in the most effective way known: in application. This avoids one’s confusing mathematical masturbation with intercourse between research and reality.

Russell L. Ackoff