Does Excessive Quantification Diminish the Social Sciences? The Case of Economics Joshua Farley Community Development and Applied Economics Gund Institute for Ecological Economics University of Vermont

Overview Math 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 normative Quantification demands that desirable ends be quantifiable in cardinal numbers Optimization demands that all desirable ends be measurable in same unit Human 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 17 th 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 Future Discount rates and mathematical tractability Exponential or hyperbolic discounting Stern review and Nordhaus critique

Human Behavior Rational, self-interested SS #s and auctions Contingent 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 Growth Fitting data to mathematical functions Singularity

The Production Function Labor, Capital and Cobb-Douglas Georgescu-Roegen’s critique Stock-flow Fund-service Stiglitz-Solow solution Perfect substitutability Weak sustainability Stock-flows required to sustain Fund Service

Complex or Simple System? Equilibrium economics and negative feedback loops How do prices achieve equilibrium? Real-life and positive feedback loops Pre-conditions for speculation Concentrated wealth Inelastic supply Inelastic demand Emergent phenomena and surprises

Is it science? Is the mah done correctly? Is it replicable? Is it worth it?

Conclusions Math 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?