Economics pretends to be mathematics, but it is not mathematics. There is a major difference. No mathematician uses a term in a formula, or a statement of a theorem, unless that term has first been defined with excruciating precision. Hence, there is no question of what the term means, let alone any debate that is carried on only because two disputants have different concepts of the meaning of their terms. As a result, a very simple proof of something will invariably persuade the other side. The cost of this, however, is that mathematics is strictly limited in what it can define and prove.
In economics, it is completely different. Terms are used in formulas without ever having been precisely defined. Economists may think they’ve defined them, but they should try reading some real mathematics to see what a precise definition truly is. The economists, I think, leave the work of definition to be inferred from the way the terms are used in the formulas. This, to me, is weird – but I suppose it could work, and it does work sometimes, but more often it leads to ridiculous debates that leave matters of real importance unexamined.Read it at Advisor Perspectives
An Attack on Paul Krugman
By Michael Edesess
Krugman is taking a lot of heat recently from all directions (Michael Hudson - Paul Krugman’s Economic Blinders and Krugman Reveals New, Flawed Definition of Austerity). At the heart of Edesess’ argument, however, is a deeper problem for economics that I attempted to address in my post, What is Austerity? The trouble arises from the simple fact that seemingly basic terms can mean wholly different things to individual economists or various sub-sects of the discipline.
Many in the profession may wish to further direct economics towards mathematics, but I fear that process will only further abstract economic thinking from application to the real world. In the realm of policy making and human interaction, individuals and groups will always hold nuanced views regarding the strict meaning of terminology, in part, because language is forever changing. Economics should embrace this social science aspect and, as Edesess says, “disdain the abstractions and think in more ordinary terms.”