31.5.07

MATHEMATICAL POLITICS? Nation columnist Christopher Hayes raises, yet again, what might be gripe 2n-1 for n large about an economics based on unrealistic assumptions. There are five dissenting theses nailed to Newmark's Door. King at SCSU Scholars has put together a somewhat longer and more favorable set of reactions to the essay. From those links, let me offer a quote from Paul Krugman that pretty well sums up the value of economics, "unrealistic" theory notwithstanding.
My point isn't that neoclassical theory can do anything. But it's perfectly possible to believe in extensive market failure, demand a lot more government intervention in the economy, while still believing that maximization-plus-equilibrium is a nifty way to think about lots of problems.
That's not to say there isn't work to be done. Herbert Gintis wrote a sympathetic review (in the December 2006 Journal of Economic Literature) of Eric Beinhocker's Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics that suggests misplaced effort in mainstream economics research, with both Walrasian general equilibrium and Tirolean (sorry, couldn't resist!) game theory turning out to be evolutionary dead ends for thinking once the principal intellectual problems were solved. There's a lot of interest in evolution and complexity, although the gains from trade between Austrians and chaotitians haven't fully been exploited.

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