Math,
Not Economics
"Yet there is no proof whatever that even
the most elementary of these functional economic equations represents a
fact of the real world." -- Henry Hazlitt
Most American universities do not teach
economics. This may sound like an obvious absurdity, since the
great majority of universities from Eastport, Maine to Chula Vista,
California have courses that purport to teach "economics,"
or at least courses related to economics. Look into any college
directory of courses and you will find a long and seemingly impressive
list of classes offered, from the Economics of Government Behavior
to the Economics of Development, from the Economics of National
Defense to the Economics of International Trade. But if you go
to any of these classes, you will be lucky to learn anything about
economics. Instead of genuine insights into how men satisfy their
multifold desires, you will be plummeted with myriads of graphs
and tables, all tangled around each other and twisted into tight,
incomprehensible knots. Even worse, the professors of these courses
will most assuredly throw dozens of lengthy, clumsy, and oftentimes
heavy equations in your direction, expecting you to treasure these
mephitic lumps of Great Wisdom with as much fervor as the liberal-left
treasures incompetence. It is especially these equations that
distress me and lead me to conclude that "economics"
classes teach math rather than economics. I admit that some real
economics seeps through cracks every once in a while, as if by
a conspiracy of accidents, but most of the time, what little economics
does sneak in turns out to consist of nothing more than blatant
fallacies or idiotic truisms: the rest is all arithmetic, algebra,
and calculus.
I could give many examples, but I am lacking in the proper sadistic
impulses, so I will offer only two. Academic Economists are still
trying to figure out how Consumption works, because they want
to play with it and make it function better. Most of them admit
that Keynes did not hit the bull's eye when he said that consumers,
in the aggregate, have a mathematically determinable "propensity
to consume," which can be described by an equation; for example-
C=.91Yd,
where C is consumption and .91 is the statistically derived "propensity
to consume" and Yd is a bogus concept known as "aggregate
demand." This function, most economists admit, is an unrealistic
way of describing consumption, at least in the long run. But strangely
enough, what the economic professorate finds most objectionable
in this consumption function is not the erroneous use of algebra
or statistics to describe an activity which cannot be squeezed
into an equation; not in the least, they love the math that went
into it and only wish to replace it with a different function.
Milton Friedman, for example, has afflicted us with his own consumption
function, the following string of mathematical piffle which goes
as follows: C=bpYp, where Yp is "permanent disposable income" and bp
is a coefficient which, according to Dr. Milton, should be close
to 1 in the long run. Now personally, I can hardly imagine anything
more dismal, nor anything more otiose, than this new consumption
function. What Milty's equation merely says is that consumption
should, in the long run, equal disposable income. Why this highly
original contribution to economic thought has to be shoved into
an equation, I do not know, nor do I understand why such a triviality
has to be expressed at all in "higher" economics. It
is obvious that most of the "disposable" income that
a person receives, whether spent immediately or stashed in some
bank, will be used as "consumption" at some time, either
now or in the future. Both the Friedman and the Keynesian consumption
functions express the same platitude; only their emphasis shifts:
Keynes concentrates on the short run, Friedman on the long run.
Neither equation adds to our understanding of consumption. This,
however, is very typical of all mathematical equations used in
economics. Either they express a bald commonplace, or a palpable
falsity.
These consumption functions display only a small fraction of what
is wrong with using math in economics. At least they have the
merit of a relative simplicity: the economic thinking behind them
can be understood. In the more "advanced" realms of
mathematical economics, you will find equations with literally
hundreds of variables, coefficients, and constants, all of them
vague and slippery and open to serious debate. The whole thing
reaches its acme in the so-called "game theory" balderdash.
Here math usurps economics altogether, with pernicious results.
The equations and the algorithms which the myopic game theorists
cook up serve only to give pcittacene "economists" and
bureaucrats the comforting illusion that they know what they are
doing. It allows those politicians who do not like the verdicts
of, say, the Austrian school of economics, to indulge in their
execrable schemes to socialize the catallactic activities of every
man, woman, and child in the nation. Worse, the mathematics gives
these same scoundrels the semblance of scientific precision. But,
as Henry Hazlitt, among others, has pointed out, it is only a
spurious precision. (See Henry Hazlitt, The Failure of the
New Economics, pp. 99-104.)
To stress my point about the imbecility of the use of mathematics
in economics, I will create my own equation, which I will call
the Imbecility Function: let I equal a unit call the
"imbecile,"
which represents how many fallacies a man holds as the truth;
thus, a man who believes in a thousand falsehoods is said to have
an imbecile quotient of 1000. Then let N equal the number
of equations a man uses to describe human action, and F
equal the number of fallacies the man holds outside of the bogus
equations he believes in, and you will find that the following
relationship between these three variables exists: I=N+F.
The imbecility function has a more analytical corollary called
the University Function. Let T equal the number of years
a man spends in higher education, and you have this gem: I=a(T+F),
where a equals some statistically derived coefficient called
the "propensity to absorb fallacies."
