April 27, 2015

The synthesis of institution and math

Comment on ‘Wicksell on the use of mathematics in economics’

Blog-Reference

Heterodoxy is not merely critical of Orthodoxy but regards it — applying the scientific true/false code — as false. This implies that Heterodoxy is not a corrective that improves Orthodoxy at the margin or an alternative view that can coexist in an anything-goes pluralism but that Heterodoxy replaces Orthodoxy just as helio-centrism has replaced geo-centrism.

This was also the original goal of Institutionalism as formulated by Veblen (1961). Now, when one can safely conclude that Orthodoxy is a failure then, by the same token, one has to admit that not much of real scientific value has come from the Institutionialists.

One reason is that Heterodoxy has always clearly seen the numerous abuses of mathematics (including statistics) in standard economics but has never figured out how to apply it correctly and with good effect to its own cause. As a result, Heterodoxy somehow landed in the Cambridge School of Loose Verbal Reasoning which has Marshall's silly slogan ‘Burn the mathematics’ above its entrance.

This slogan has been updated by the Post Keynesians to "it is better to be roughly right than precisely wrong!" (Davidson, 1984, p. 574)

This slogan sounds plausible in political economics but it is not acceptable in theoretical economics because it amounts to abandoning scientific standards.

For Heterodoxy it is high time to get out of the populist anti-math camp and at long last to accomplish the synthesis of Institutionalism and formalization (see 2015).

"I mean by this that formalization eliminates provincial and inessential features of the way in which a scientific theory has been thought about. ... Formalization is a way of setting off from the forest of implicit assumptions and the surrounding thickness of confusion, the ground that is required for the theory being considered. ... In areas of science where great controversy exists about even the most elementary concepts, the value of such formalization can be substantial." (Suppes, 1968, pp. 654-655)

Heterodoxy either becomes a science or goes down the drain arm in arm with Orthodoxy.

Egmont Kakarot-Handtke


References
Davidson, P. (1984). Reviving Keynes’s Revolution. Journal of Post Keynesian Economics, 6(4): 561–575. URL
Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Institutions. SSRN Working Paper Series, 2598721: 1–18. URL
Suppes, P. (1968). The Desirability of Formalization in Science. Journal of Philosophy, 65(20): 651–664.
Veblen, T. (1961). The Place of Science in Modern Civilisation, chapter Why is Economics Not an Evolutionary Science?, pages 56–81. New York, NY: Russel and Russel. (1898).