Mathematics and economics

P. Krugman

I’ve been getting some comments from people who think my magazine piece was an attack on the use of mathematics in economics. It wasn’t.
Math in economics can be extremely useful. I should know! Most of my own work over the years has relied on sometimes finicky math — I spent quite a few years of my life doing tricks with constant-elasticity-of-substitution utility functions. And the mathematical grinding served an essential function — that of clarifying thought. In the economic geography stuff, for example, I started with some vague ideas; it wasn’t until I’d managed to write down full models that the ideas came clear. After the math I was able to express most of those ideas in plain English, but it really took the math to get there, and you still can’t quite get it all without the equations.
What I objected to in the mag article was the tendency to identify good math with good work. CAPM is a beautiful model; that doesn’t mean it’s right. The math of real business cycle models is much more elegant than that of New Keynesian models, let alone the kind of models that make room for crises like the one we’re in; that makes RBC models seductive, but it doesn’t make them any less silly.
And conversely, you can have great work in economics with little or no math. I can’t pull up papers now, but as I recall, Akerlof’s market for lemons had virtually no explicit math in its main exposition; yet it was transformative in its insight.
So by all means let’s have math in economics — but as our servant, not our master.

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