Comment on ‘The Keynes-Ramsey-Savage debate on probability’

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Economists have the talent to mess up everything they touch. Curiously, everything that works fine in the real sciences does not seem to work in economics. The long standing mathiness discussion corroborates this observation. More than one physicist has wondered about the ‘unreasonable effectiveness of mathematics in the natural sciences’ (Wigner) and this led Velupillai to wonder about the ‘unreasonable ineffectiveness of mathematics in economics.’ The same holds for probability theory and empirical testing.

In a sense, economists had the bad luck that when Adam Smith started to think about the economy mathematical tools had already proven their unreasonable effectiveness. So economist could not resist to apply them as they found them. It can be said that neoclassical economics has literally been built around calculus (Mirowski, 1995). This was the first big mistake.

“The mathematical language used to formulate a theory is usually taken for granted. However, it should be recognized that most of mathematics used in physics was developed to meet the theoretical needs of physics. ... The moral is that the symbolic calculus employed by a scientific theory should be tailored to the theory, not the other way round.” (Wittgenstein, quoted in Schmiechen, 2009, p. 368)

The whole mathiness discussion is a surface phenomenon that covers the underlying incompetence of economists to create their own mathematical tools. Therefore, a precise distinction has to be made. One can agree with Keynes that constrained optimization is pointless as a formal embodiment of human behavior, but one cannot agree with him that mathematics or formalization is entirely misplaced in economics. The same holds for probability theory.

The task of Heterodoxy is therefore to quit the bad habit of taking prefabricated tools from the math department and instead to develop their own tools. As a matter of fact this has already been done. For the application of Popper's idea of propensity to behavior in the economic realm see (2015).

With regard to Keynes and methodology we should agree that his valuable contributions to economics lay elsewhere (2011).

“I consider that Keynes had no real grasp of formal economic theorizing (and also disliked it), and that he consequently left many gaping holes in his theory. I none the less hold that his insights were several orders more profound and realistic than those of his recent critics.” (Hahn, 1982, pp. x-xi)

Egmont Kakarot-Handtke

References

Hahn, F. H. (1982). Money and Inflation. Oxford: Blackwell.

Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL

Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Behavior. SSRN Working Paper Series, 2600523: 1–17. URL

Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.

Schmiechen, M. (2009). Newton’s Principia and Related ‘Principles’ Revisited, volume 1. Norderstedt: Books on Demand, 2nd edition. URL