Mainstream economics: Sacrificing realism at the altar of mathematical purity

– Extracted by Lars Syll from comments of Andrew Haldane

“This critique goes beyond the narrowly technical — that the workhorse neo-classical model of the economy was found to be lame when it came to running a real crisis race. The deeper critique is that these models, as well as the technical language accompanying them, have played a role in policy and in society that has been disproportion- ate in two senses. First, disproportion- ate relative to our state of knowledge. Existing economic frameworks have shouldered a policy weight that is sim- ply too great for them to bear, given the degree of uncertainty and fragility that surrounds them. Second, disproportionate because these frameworks placed an excessive degree of policy power in the hands of the technocrats wielding them …

“Mainstream economic models have sacrificed too much realism at the altar of mathematical purity. Their various simplifying assumptions have served aesthetic rather than practical ends.

As a profession, economics has become too much of a methodological monoculture. And that lack of intellectual diversity cost the profession dear when the single crop failed spectacularly during the crisis. This monoculture, it is argued, has also narrowed the economics curriculum in universities. This has generated an ever great- er focus on the mathematical gymnastics of optimising models and too little focus on the everyday aerobics of how the economy functions. Accompanying this has been a neglect of disciplines that abut and illuminate economics: economic history, moral philosophy, money and banking, radical uncertainty, non-rational expectations. In short, neglect of the very things that make economics interesting and economies important.“

– Andrew Haldane (former chief economist at BoE)

Source: Real World Econ Rev blogs https://rwer.wordpress.com/2022/06/05/mainstream-economics-sacrificing-realism-at-the-altar-of-mathematical-purity/