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Source link: http://archive.mises.org/15635/daniel-bernoulli-and-the-founding-of-mathematical-economics/

Daniel Bernoulli and the Founding of Mathematical Economics

February 10, 2011 by

The use of mathematics necessarily leads the economist to distort reality by making the theory convenient for mathematical symbolism and manipulation. Mathematics takes over, and the reality of human action loses out. FULL ARTICLE by Murray N. Rothbard

{ 11 comments }

Peter Surda February 10, 2011 at 9:53 am

Math isn’t bad. But rephrasing nonsense in math language does not make it any less nonsense. Here’s a nice example: http://failblog.org/2011/02/08/epic-fail-photos-graph-fail/

Niederlinski February 10, 2011 at 10:39 am

You cannot “disvcover the theory of something”, but you can “formulate the theory of something”..

Seattle February 10, 2011 at 10:59 am

I think Rothbard’s wrong to place the blame on mathematics itself here: The real problem is the assumption that you can always discover properties about a thing by manipulating your model. This only works if your model is accurate to begin with! Blindly messing with an inaccurate model will only get you farther away from the truth.

El Tonno February 10, 2011 at 12:57 pm

Yes.

One cannot fault Bernoulli for dabbling in economics. One cannot fault mathematics (or at least that part of mathematics that was used) for being the wrong tool for the job.

One can fault the hoi polloi for following Bernoulli on a wrong track. But that’s human nature. People followed Aristoteles’ bizarro physics for centuries until someone decided to take a day off to think about what was being said there and do a couple of experiments.

Alex February 10, 2011 at 11:21 am

When I was a graduate student I attended a seminar on an economic topic I cannot remember. After the presentor had filled board after board of mathematics, Harry Johnson (the prolific Canadian economist), who at the time was a professor of economics at both the London School of Economics and the University of Chicago, asked if the individual would mind repeating his explanation in plain English. There was much stuttering and stammering and embarrassment as the simplistic story was laid bare.

Bill Ross February 10, 2011 at 5:02 pm

Thanks for this. Now, I understand the root cause of the Austrian aversion to mathematics. Simply stated, the assumptions outlined in this article were WRONG and, it is sheer folly to attempt to quantify something as subjective as “utility”, marginal, or otherwise.

BUT! Don’t throw out the baby with the bath water. If you stick to REAL things, mathematics is very economically useful and, even enlightening. For example, the relationship between productivity, greed and survival of civilization (peaceful commerce) as proven in the grim reaper of “Mathematics of Rule”:

http://www.nazisociopaths.org/modules/article/view.article.php/c1/32

The minimum that should be taken from this is the consideration of BOTH productive and unproductive economic activities as positive values and summing them as an indication of economic health is OUTRIGHT FRAUD. In the real world, unproductivity DESTROYS productivity, as proven in the linked article.

As if people have not noticed…

Seattle February 10, 2011 at 6:05 pm

Simply stated, the assumptions outlined in this article were WRONG and, it is sheer folly to attempt to quantify something as subjective as “utility”, marginal, or otherwise.

I don’t think it’s useless to attempt to quantify subjective things. Preference, while dependent on the person, is determined by a definite computational procedure. A procedure which, I see good reason to hypothesize, is mostly constant over the whole of humanity. The individual variations are tiny compared to the bulk of the process.

Think of all the capital that could be saved from being wasted if we could tell, in advance with reasonable success, which products would succeed or fail! I think it’s something very much worth pursuing.

Ben February 10, 2011 at 7:00 pm

I don’t see why you can’t do with English what Rothbard criticizes of math here, or why you should expect it to be more prevalent in math or promoted by math relative to English.

Ben February 10, 2011 at 7:33 pm

Take the Sokal paper as proof that English can be just as bad. Why single out math?

Toppler February 11, 2011 at 3:20 pm

“For the use of mathematics necessarily leads the economist to distort reality by making the theory convenient for mathematical symbolism and manipulation. Mathematics takes over, and the reality of human action loses out.”

Necessarily? So, since Rothbard used some mathematics in Man, Economy, and State, that means… oops!

pbergn March 14, 2011 at 4:56 pm

With all due respect, completely disagree with the author.

Author writes:

“But even this relatively innocuous formulation would be incorrect, for utility is not a thing, it is not a measurable entity, it cannot be divided, and therefore it is illegitimate to put it in ratio form, as the numerator in a nonexistent fraction. Utility is neither a measurable entity, nor, even if it were, could it be commensurate with the money unit involved in the denominator.”

The utility, while being a subjective value in case of a single individual, in fact, CAN be quantified as an average value as perceived by a sufficiently large group of individuals…

Much like in Theory of Probability, while it is not possible to predict the individual outcomes of probabilistic events, it is however possible to quantify the probability or the measure of likelihood of an occurrence of a certain event for the sufficiently large number of trials (see the “Law of Large Numbers” for further details). Even the very complex chaos systems, such as weather patterns, can be modeled with sufficient precision with the modern Mathematical methods… If this wasn’t the case, no satisfactory Criminal Law could possibly exist for a given society, and yet we know that the Criminal Laws have changed but insignificantly during the centuries…

The human nature is not an absolute mystery, and does not require to be treated as such – with mystical skepticism rivaling that of worshipping of a deity. We, as human beings, share a lot of similarities, a lot of common, identifiable trends, we have similar needs, and determinable qualities and traits…

Since the Science of Economics is a social science that concerns itself with the problems of the production, distribution, and consumption of goods and services, the use of Mathematical Analysis methods and tools in modeling and quantifying of certain economic tendencies and correlations, verifiable empirically, is quite justifiable in my opinion…

Moreover, to bring an instance of an incorrect or seemingly incorrect Mathematical Model as a proof, that Mathematical methods in general are NOT applicable to the concerns of Economics, is simply reductionist and intellectually dishonest.

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