A Political Scientist and a Mathematician on Math in Economics

I found the lovely quote above in Rothbard’s Praxeology: The Methodology of Austrian Economics, and it is a perfect explanation for the Austrian skepticism of empirical methods. Reducing human decision-making into neat numbers misses the dynamic process of markets, and gives a false sense of knowledge. (See Hayek’s Fatal Conceit.) This illusion leads many to believe that we can “maximize” the common good, social utility, or whatever they call it these days. Because all people are exactly the same, correct?

No. And so, there is a place for mathematics in economics, but math is not the epitome of economic thinking.  People are not robots, and we need to embrace human individuality to understand why humans do what they do.

Advertisements