Re: The conflict at Notre Dame

[Clifford Poirot <cpoirot@xxxxxxxxxxx>]

Ok, I'm going to try to be nice. Still with reference to BS I'm nearly on
the floor of my office with laughter. Such levels of ridicule are probably
not appropriate to an academic list serve. But these are the guys whose
mathematical models nearly led to a financial meltdown. I would regard the
mathemetization of EMH to be the worst example of where mathemetizing
economics has led us. I won't repeat here the lengthy discussion this list
has had of BS and EMH as it is archived. Also see my article in the JPKE on
the Russian financial crisis.

As for the others, first let me say that my objection to mathemetization is
not an objection to what I might call "low level mathemetization or
quantification". What I would hold as an example of this is Marshall's
brilliant synthesis of institutional, evolutionary and graphical analysis in
a partial equilibrium framework. This is the proper use and proper level of
mathematics. Supply and demand analysis does indeed help to focus and
clarify many issues. Yet it does not obscure (if Marshall is really
understood) the institutional, historical and evolutionary analysis
necessary to put partial equilibrium into proper perspective.

What I am against is making the use of high level mathematics the sine qua
non of the profession, and believing that heterodox economists must ape this
tendency towards obfuscation.

I would regard the work of Coase and Williamson as a contribution to
economic thought. But their points and insights can be understood perfectly
or criticized without the recourse to higher level mathematics. Indeed,
whether one likes or dislikes the NIE or Public Choice theorists, it is
possible to state all their conclusions without higher level math. So I ask,
what is gained by doing so, other than a false sense of added rigor and
scientific precision?

-----Original Message-----
From: Roger Koppl [mailto:koppl@xxxxxxx]
Sent: Thursday, March 06, 2003 8:32 PM
To: pkt@xxxxxxxxxxxxxxxx
Subject: Re: The conflict at Notre Dame


Clifford Poirot challenges the list to come out with a case where
"mathematics or econometric modeling has provided a theoretical insight that
made any substantial difference in how policy has been executed, and thus
led to an overall improvement in economic performance."  I think there are
many examples.  John Sutton provides two in _Marshall's Tendencies: What Can
Economists Know?_ (MIT Press, 2000).

1. Black and Scholes.

2.  Certain auction markets for drilling rights.

Vernon Smith's experimental results have been applied to the real-world
design of tradeable pollution rights and to electricity and water markets.

Much of the literature in theory of the firm (Coase, Williamson, and all
that) is mathematical and much of *that* has been applied by real firms out
there trying to make money.  I suppose that's not policy, but it is "real
world" application.

In business and government alike the elementary theory of supply and demand
gets applied every day, sometimes in the context of relatively sophisticated
econometric forecasts.

Well, I could go on, but I'll stop here.

Of course you might not agree that these applications have been beneficial.
On the other hand, it says nothing about mathematical methods that heterodox
theories have not been adopted by the politicians.  As for the business
world . . . Well, I guess you could quote Keynes on pretty polite techniques
for the board room.


Roger
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Roger Koppl
Professor of Economics and Finance
Fairleigh Dickinson University
Madison, NJ 07940
USA

World Wide Web: http://inside.fdu.edu/pt/koppl.html
Internet: koppl@xxxxxxx
Phone: (973) 443-8846
Fax: (973) 443-8377
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