"Too much Maths, too little History: The problem of Economics"

Ladies and gentlemen, my job is to try to persuade you, along with my colleague, Dr. Harun Chang, of the truth of this proposition that there is too

much

mathematics and too

little

history

in

economics

as it is currently taught and conceived, and well , let's get started. With an obvious question, why do people study

economics

basically to understand how economies work? There are two different ways of understanding that there is mathematics and

history

and they are at opposite poles in terms of epistemology. take mathematics first, first, two things that mathematics tries to do, says to do, firstly, it deals with propositions that are necessarily true, that is, it is a branch of logic, but secondly, mathematics deals of propositions that can be tested and economists, really. they endorse mathematics in the second um in the second um uh sense of generating provable propositions, but because the social system to which they apply mathematics um is so complex, too complex to obtain reliable proofs, they are tempted by the first or the what I would call the Platonic view of the subject and throughout the history of economics, one can find economists praising mathematics as the path to rigorous and elegant laws.

Ain, as a famous economist said, similar to the laws of celestial mechanics and this powerful Platonic temptation. very well summarized by Nobel Prize winner Paul Krugman when he wrote this after the 2008 crisis 2009 the economics profession went astray because economists as a group confused Beauty dressed in impressive mathematics with truth economists fell in love with the old idealized vision of an economy in which rational individuals interact in perfect markets, this time adorned with sophisticated mathematics, is an old Vision adorned with sophisticated mathematics and this drift towards this insidious drift towards Platonism explains something, I mean, it is particularly, you can find it in Bob Lucas's work explains something that many people have noticed and that is the strong or formative impulse of mathematical economics, now an economic model is not like that of an airplane model that is reality in a miniaturized format. way in which reality is approached through assumptions an assumption is said to be chosen for purchase in reality um but in fact um more commonly assumptions are selected because of their convenience typically to make possible the solution of an equation by excluding elements strange but these Acts of exclusion are choices that one must always remember: that which defines the

problem

of interest or directs research along certain paths, that is, that reflect the values ​​of The Economist.

As soon as you enter into an assumption based on a mathematical model, you are actually inserting the issues that you think are important and also inserting your view on how they should be discussed and excluding other views on how they should be discussed and this exclusionism, along With the virtual impossibility of proving something, it gives mathematical economics a powerful incentive to make the real world more like its models than to make the models more like the real world. So there is a very, very important bias in mathematical economics. What then is the role of history in economics?

I would say that the role of history is to verify the reality of propositions. of financial theory, such as that risks are correctly priced on average, could not survive any real knowledge of a financial a market how financial markets work or of economic history the branches of history history especially suitable for testing the In reality, economic history, the history of economic thought, and political and social history are excluded or minimized in the standard economics curriculum; have been largely excluded by mathematical economics. The overall reason for the story's exclusion is quite insidious; It arises from the belief that everything that can be learned from history has already been incorporated into the latest textbooks and this ridiculous belief has taken a heavy toll on the study of economics, although I believe it arises from what I call physical.

Envy is an affliction to which many economists are prone. Economics wants to be a hard science if economics is Just like a natural science, the lessons of history have already been incorporated into the latest models and there is no use in remembering the history of mistakes, um, to quote JB, he says, famous for something known as Say's law, um, and this was already true in the early days. In the 19th century he wrote what useful purpose can be served in the study of absurd opinions and doctrines that have long since been disproved and deserve to be so.

It is mere useless pedantry to try to revive them the more perfect a science becomes, the shorter its duration becomes. history our duty with respect to errors is not to relive them but simply to forget them, since the history of economic thought and contemporary economics courses have taken seriously the maxim of say se and have proposed to exclude the errors of the past and that is why Actually, there is no study of economic thinking in most economic curricula today because that would be the study of errors and we have transcended those errors, haven't we? That's why we never have faults now, except the point, the point of studying. economic his history of economic thought is precisely the realization that important debates in economics have never been resolved and continue to bother us today the quantity theory of money is true it is true that government spending is inherently wasteful the economy has always been divided economists always on such topics and the different contemporary schools are heirs of these disputes, to sanitize them by providing a story or opinion from a conventional textbook is to rob the subject of its richness, diversity and capacity to illuminate reality, the knowledge of the history of economic thought. it can help.

Let us avoid arrogance or absolute confidence in our favorite school of thought, whether neoclassical or post-Canian, so economists should not aim for a comprehensive universal and timeless theory, but should try to keep up with and understand a continually evolving system. change that studies history. makes it clear that the truth of economic propositions depends on the context in which they are applicable, for example, can anyone doubt that the Keynesian revolution arose from the circumstances of the Great Depression? Can anyone doubt that Fredman's monetarism was a reaction to the inflation of the 1970s, to take a less obvious example and I think this is controversial: marginalism, the marginalist revolution of the 1870s, was part of a attempt to refute Marx's labor theory of value, the notion that the factors of production are paid their marginal products was a very useful affirmation of the value of the businessman to society, economists try to incorporate some history into their understanding of economics, but through abundant use of statistics and econometrics, but as Robert Solo rightly points out in a very valuable article. reading everything strictly the economic activity of the IC is embedded in a network of social institutions Customs beliefs and attitudes concrete results are undoubtedly affected by these background factors some of which change slowly and gradually others erratically as soon as As a time series becomes long enough to offer hope of discrimination between different hypotheses, the probability that they remain stationary decreases and the noise level increases correspondingly under these circumstances.

A

little

cunning and perseverance can bring you almost any desired result. Finally, history shows us how economic ideas reflect power structures. Can we reasonably doubt that the financial sector? The theory reflects the banking system's interests in freeing itself from state regulation, so let me end with a final thought: progress in economics does not go from the particular to the general. I think it is a big mistake not to start with partial and incomplete theories than to evolve through a mathematical process towards increasingly general theories that contain progressively more truth about economic life that is the model of a natural LIC that is not how the economics has never been true in economics I would like to defend the view of horses during courses to choose those parts of Economics appropriate for different

problem

s and situations without any presumption that one approach is superior to others and, for example, development economics It requires relatively little mathematics because the real problem has to do with government and governance, on the other hand, if you will.

To forecast the supply and demand conditions for a particular product or a particular sector of the economy, mathematics is very useful and, in fact, essential, so there is a kind of M. There is a case for mathematical microeconomics. In fact, it is very important. but having said that the banishment of history from standard economics curricula is a symptom of a loss of pluralism and imagination in the discipline, it has become complacent and archaic in many of its intellectual structures, students are now leaving universities thinking there's only one way to do it. economics the way they were taught in years 1, two and three, and this lack of diversity leads to intellectual arrogance.

Economists treat anyone who doesn't do economics their way as if they were somehow inferior; They may be politely condescending, but condescension is certainly one and I hope the conversation will be civil tonight. Awareness of the past should make our discipline less arrogant and more useful. Thank you, thank you very

much

, Mr. Keli. Now I call Professor Celi, who will not be the least bit condescending, I am sure. Hi, okay, so I don't know if there is too much math in economics. Maybe there are too many or too little. I think as a starting point, I think maybe the most useful thing I can do is try to tell you what mathematics is to me as an economist and how I use it because I use it and why I use it so what do I do?

Well, it usually starts or not really, it usually always starts with observations. Well, I am always attentive to the facts that are. maybe a little disconcerting a little difficult to understand, hopefully it's important to understand that things happen and I think economists are here, if there are any, if things that have to do with economics are here to explain why it happened, that's fine , yes in fact, economics in many ways is it's history, uh, because it's about looking at something that happened, maybe it's just an event that's been described by other historians or even by journalists, or maybe it's in the data and there is some data that tells you that there is a fact out there and So, like many historians, you look at this and you try to interpret it, you understand it to tell a narrative, to tell a story of what happened in that particular case and almost never It starts with mathematics, it almost never starts with an intuition. on a hunch, it starts with some kind of story that you tell yourself in your mind and you tell it yourself in words, okay, you tell it to yourself in words, you say hm, this is an interesting fact that just happened there or maybe it happened 200 years ago. that matters it doesn't matter um how can I explain it maybe you say well here it is here is a possible story a there was a fact to that fact a fact caused B fact B then caused the fact C you tell yourself a narrative okay now what happens when you tell yourself to yourself narrative so this is doing this is building a theory okay, now building a theory doesn't mean using mathematics okay, you know you can you can build a verbal theory sociologies have theories historians have theories every time you explain something that's a theory, you're making a theory, but one thing I think any theory should have, whether it's expressed verbally or with mathematics, it should be logically consistent, it should be linked, it shouldn't miss things, it shouldn't draw the wrong thing. conclusions that should not be led astray, so why is it useful for me?

Because what I do is first tell myself the story in words and then tell it again. IET, I tell this, I try to retell the same story in mathematics and why is it useful? because sometimes you know, if you really want to know why this is useful, it's useful because I'm not smart enough. Okay, I'm not smart enough to think of all the things I might be overlooking in my argument, but I do forget something. masth will tell me the math will ring a bell and say look you're not getting what you expected so you're missing out your story was too simplistic you missed something ok let me try to give you an idea this is a bit risky. but let me try to give you a little idea of ​​how it might work.

Okay, now this is a little difficult because I think a lot of you, I don't know how not, I don't know how many of you are Eon majors or or. I have taken my course, for example, in the first year, so I need to come up with something that is accessible to people who have not even taken thefirst year of economics, so it will be something very simple, let's say that Well, Steve, my colleague Steve is a labor economist. He worries about what happens to the workforce. The supply when wages rise changes, will workers want to work harder when wages rise than before wages rose, so if I address this question in a very verbal and simple way.

I think I will come up with something very clever: wages increased when the worker should be willing to work more. Well, the reward for working has increased, so they should work more. and I might be tempted to follow it, you know, I might be tempted to say well, that makes sense. I'm going to follow it now. If I force myself to also write the same story in mathematics, I will immediately realize that I am missing a big part of the story, which is that wages are higher, of course, as everyone who is in economics probably already knows. , that wages are higher, people can also afford to consume more leisure and, therefore, in reality, the effect of wage increases on the workforce.

Supply could be an increase or or but I think you can see how I might have gotten too excited because my salary increases so the Supply label goes up and stops there, if I force myself to retell the story in math I'm going to catch that error. so that's one of the ways I use math. I use them as a thinking tool. I use them as a thinking tool. I use them to detect errors in my reasoning. Now let me be very clear. And this is where the point comes. uh you almost never start with the math, it's important if I found out that my simple intuition was wrong just because the math said so and then I went to my colleagues and said, well, the math says: this gets me kicked out of the place. expelled from the room I need to go back and understand again in words what the masses are telling me okay, why was I wrong, what did they miss and if it is only the mother who says that and there is no intuition, there is no reasoning, there is no way of Iz rational in verbal form what you have found with mathematics, then that is not good, good economics, okay, then it is a double narrative, there are two narratives that reinforce each other, there is a verbal narrative and there is a mathematical narrative , the mathematical narrative keeps you on your toes, but the verbal narrative is ultimately the most important thing, which is why when we teach economics I mean those of you who took my course know that I don't.

I don't use any math. I think I can teach. Most of what is important in economics without math, but I wouldn't necessarily have believed it if I hadn't checked the reasoning with math before, but once I checked it, I can trust the verbal version and just move on. with that, that's one way I use mathematics as a thinking tool. Now there's another way to use math that I think is becoming more and more important, especially in my microeconomics-heavy field, which I think is becoming more and more important because it works. very well with computers and that is precisely doing what one of my opponents and one of the defenders of the proposal has just told you: it cannot be done with mathematics, which is dealing with complexity.

I think it's completely the opposite. I think mathematics is a wonderful tool. that allows us to deal with things that even people smarter than me can't handle because they're too complex. Well, think about microeconomics. There is some shock that occurs. You know, maybe the government is implementing austerity measures. Central banks are changing interest rates. That affects the behavior of literally hundreds and hundreds of thousands of different agents, consumers, businesses, other branches of government, foreign agents, and the way these people respond to this, to changes in the economy, will trigger more responses from others. , so there will be second round answers business responses affect consumer responses consumer responses affect government responses government responses affect business responses I I I don't know anyone who is smart enough to for maybe K was uh but uh since then I don't think There have been many people smart enough to trace this incredibly complex web of reactions and counterreactions, but if you have, if you think you have something reasonable and this is a big if, but that's what we're talking about here. about mathematics, if you think you have a reasonable description of how agents process information and act on that information, then you can use a mathematical formulation representation of this on a computer and have some again create a narrative of the answers to economics .

So that's the other of the two uses of dough. That's why it's important to me. That's why math is a critical tool in my toolbox. It's not the only one. It is not the main one. First of all, as they say, there is. Always thinking about it, but, without mathematics, I would be like a plumber who has had a tool taken away from him, one of the many tools he uses every day, let me do a couple of things like that. off the cuff responses to what we just heard uh um maybe the biggest misconception that I think there is about economics and it's not so much about math and in fact let me first make a more general comment.

I think there is a lot of confusion between mathematics and other possible shortcomings of economics, okay, and if this debate were about other possible shortcomings of economics, I would probably side with those who criticize economics, for example, and I think that the discussion has already arisen very often. The question of whether there is too much in economics gets mixed up with a discussion about whether the assumptions of economics are right or wrong, are they realistic or unrealistic, should they change over time, if that were a debate I would be much more sympathetic to it. . For example, I think there are huge problems in economics about the assumptions we make, for example, assumptions about the extreme forms of rationality that agents have or the extreme forms about an agent's information capacity, but that has nothing to do with it. do with mathematics. have wrong assumptions and be completely verbal and still get garbage in the end, okay, and you can have wrong assumptions and be a mathematician and get garbage in the end, you can have the right assumptions, be verbal and get it right, you can have the right assumptions and Being a proper mathematician, it is very important to me that we separate the debate about whether economic assumptions are correct.

I think in many cases they are not, and the assumption and discussion of the methodology of mathematics, which are completely separate, are two more points. Another huge misconception about economics, this idea, which I don't know where it comes from, that there is only one general model and that we are all slaves to this model and we try to fit everything into that model, it is simply not true. It's just not true, Krugman, by the way, I don't need to share Krugman's opinion on economics. I don't think Krugman has been in a seminar room for many years. uh uh um, it's just not true uh again, go back to my initial review. ex You look at something and you tell yourself a story, okay, you're not going to try to fit this into some platonic model that you know, like the big brother, uh, that's out there, no, you're going to try to write something that, uh, is essential and trying to get at that particular question, so I completely agree with Roseli, there isn't, you should have a different approach, the model, the story that you tell, it will be guided, um, it fits the questions particulars that you do and that's what we do all the time history I have very little to say about it um I think there is an enormous amount of history in economics there is an enormous amount let me give you a little information but it is not decisive but I think that for you Get an idea, in the Department of Economics we give every year, not really, not all of us who started this year, but from now on it will be every year a prize, a prize, a prize for the two best doctoral theses. the two best doctoral theses of that year, so we have a thesis on the great recession, of course, we have a thesis on development in the villages of Bangladesh, today we have a thesis on labor markets, today we have all kinds of things focused at present, the two winners.

This year's prize for thesis on respectively one wrote a thesis on the consequences of the Napoleonic blockade on the development of the cotton industry in France this person won the thesis for the best doctorate Pride for the best doctorate in economics Department of this year the other winner won a prize for the consequences of the integration of the telegraph between Europe and North America at the end of the 19th century these are the two people to whom we, the economists, the historically blind economists, have awarded this year um in the department, for Of course, we knew this debate was coming up, so, we're dealing with data all the time, we're constantly looking at data and I think that's one way of doing history, of looking at history, data tells us stories and and our job is to try to understand them, so I think we are historians more than anything, professor.

Now I call Professor Harun Jang to present the proposal, please, of course, thank you all for coming, thank you to the organizers for organizing this. uh, wonderful event, uh, yeah, let me start with this, you know, according to Dr. Sheldon Cooper, the greatest scientist of our time, long after Steven Hawking, according to him, at least, the Big Bang theory , to unravel the mysteries of the universe we need three things. Math. Science and History is uh, yeah, keep in mind there's no economics, yeah, well, of course, there are people who think that studying history is a pretty boring thing, which is pretty useless and in this film based on the brilliant work of Alan Ben, The History Boys, there is a character. named Raj is this guy played by young Russell toi who is asked by his history teacher to define history and he gives a very concise answer that a lot of people could agree with and it's just one thing after another Well actually , these days, many Economist, uh, oh, what happened here, slideshow, where's the slideshow, of course, these days?

I mean you know it's slowly starting to change, but let's be real. There is an intellectual hierarchy of purpose in our profession in which, at the very least, this does not move, there is no displacement, okay, so let's leave it at that. Yes, now this is an OP intellectual hierarchy in which the less related what you do is to the real world, in some ways the more intellectually superior you are, so if you are the smartest you make mathematical models of something that has very little to do with it. see with the real world, like me.

I don't know, touring machine, no, don't get me wrong. I mean, these things need to be done. You know, I'm not one of those people who deny that these things are useful, but somehow these people are believed to be superior to other people. If you are not that smart you can become an econometrician but never run regressions but rather an economic theorist so ideally you should have a PhD in statistical theory, if you are not that good then you will do macro if you are not even that good. you become a development economist like me and if you're not even that good then you become an economic historian, you know?

And if you're out there surviving, factory managers trying to understand how companies organize their production, you know there must be something wrong with you, no. This kind of intellectual hierarchy unfortunately exists in other fields, you know, many of you have seen The Big Bang Theory, yes, there is a clear hierarchy. Theoretical physicist, yeah, experimental physicist, well, Sheldon and Leonard, yeah, and then Howard, yeah, he just went to MIT and did it. engineering, yeah, so it's like scum, yeah, so I'm not saying that economies are unique in this, but somehow we've developed this, uh, thinking that somehow, abstract theories, mathematical models that are useful , but I would say that economists need to study history.

They need to understand history and they need to learn lessons from history and I can think of at least five reasons for that. Well, first, very obvious but important. The point of history is where the president comes from, so without understanding the past well we can understand the present well. Yes, it is a very obvious proposition, but people often forget that it is. Second, what people know about history or rather what they think they know about history affects the present and, by implication, the future by informing people's decisions, including how, for example, they construct their models. when economies, so despite pretending that economists don't need to know anything about history to make the right policy recommendations, many policy recommendations are supported by historical examples, so free trade economists have the Biggest weapons in the arsenal, yes.

Great Britain and the United States became economic superpowers because they practiced freemortgage or applying for a job that was actually devised by sociologists and economists learned it from them and then, you know, they made their own changes to it. The second example I want to give you is an investigation into the minimum wage. There have been many studies. particularly in the 1990s about the effect of minimum wages and whether minimum wages destroy jobs and lo and behold, a lot of that literature showed that either there are no job losses or the job losses are relatively small now that there is a big debate between those who find zero and those who find small, but the effects are small and for policy makers, the differences that were found are probably not that important again, these studies have been quite influential in policy and probably in the UK national minimum wage.

In 2000, it was instituted in part because, from these kinds of findings, you now know that any effect of the minimum wage on employment runs counter to the more standard model of a competitive labor market. If you have a downward sloping labor demand curve, you would think that raising the minimum wage destroys some jobs, but certainly the theories we have are flexible enough to accommodate a finding of zero or even job gains, plus , it just takes some friction in the labor market where workers are actually looking for work, for you to know that's not the case. that these findings necessarily refute existing models.

Having the models in mind is useful because they warn us that, despite these findings, these findings are in circumstances where minimum wages are quite moderate, such as in the US and the UK, that doesn't mean. that you can raise the minimum wage to £15 or £20 and necessarily expect the same benign effects, so to me a lot of economics is applied fairly and in tune with what's happening in relevant world politics, and that doesn't makes sense. It seems to match the description we hear from critics of the discipline, so if economics isn't doing that bad, why is the image of economics so bad?

I think the reason is that the teaching is not that good. Like research, I think teaching focuses too much on mathematics, there is very little empirical context and very few applications of what we are doing and very little effort to teach you how to make use of the tools that we use. I have to join outside, you know? My conclusion is basically, um, I agree with you, there should be, there should be less models, there should be less mathematics now, I would say on the margin, not wholesale, you know, I don't think we should throw away.

All the math and all the models, I think the way Franchesco has described them, are actually quite useful. I wish there was a little more history in economics and in the economics curriculum. I would be quite open to this. I think we should interact more with other social scientists. I don't see anything wrong with that. On the other hand, I am skeptical that all of this is going to lead to a huge transformation of the economy and suddenly it becomes this wonderful, very different animal, at the end of the day we are social sciences. We're dealing with complex social interactions, um, and they're very difficult questions, there are no easy answers, um, and I doubt it, you know, just by having more interactions, I think it's fruitful, but I don't think it's going to be revolutionary and all. that. suddenly the economy is going to become something great and very different um no, I don't see that happening um even now you know, I think the economy is a pretty broad Church um it's not just some uh free market free traders uh everyone who they want small government, um, it runs the gamut, from Joe Stiglets to Danny Caraman to Bob Lucas, with very different points of view and very different ideas about what to do within the current framework, um, uh, of Economics, so that It's everything to me, thank you Professor P.

I would like that. To continue with the point that I considered the critical point made in that presentation that there is a difference between the university curriculum and what economists do for research, it seems to me that it is worth discussing this distinction in more detail and I imagine that there are people in the room who will have strong opinions on that, but could you ask the other members of the panel who think whether there is a distinction between applying this proposal to the undergraduate curriculum has more validity than applying it to economic research or the advancement of knowledge, any offering, uh, yeah, I think there's certainly a problem, you know, I mean, what's happening in the classrooms is quite a bit behind what's happening on the academic front, but I think that, you know, you think just a marginal adjustment, as you know, introducing a little bit of this would help.

I think we have a problem because I think the problem with the current undergraduate teaching program is that unfortunately it has been designed for students who are supposed to be likely to pursue graduate studies, but let's face it, I mean 90% of you they will go out into the real world, they will work in the private sector, they will work in international organizations, they will work in NOS, you know, they will work in the think tanks and for I think the curriculum is too abstract and not related enough to the real world and I think that is a serious point that we must confront.

I mean, it's no good pointing out that you know D is a jerk. that if what you see in the classroom is quite abstract, and you know the duality theorem and you know that a lot of mathematics and you know that students need time to learn other things, yes, could you reinforce that, I mean, when I was in the First War? I spent several years um marking up the MSC thesis um and um they were all really formulaic um I mean, you start with an intuition of some kind, then, um, then you introduce the model into um in mathematical form and then you test it.

One way or another, they usually don't end up being conclusive, but you've shown that you can do what is required and those are things that certify you as competent now, whether you do something after that, that's good, it doesn't matter. . I mean, but, um, that's, that's the kind of next stage after you've done college and, of course, gotten into that and I also want to say one thing that I don't recognize, I mean, I think the opposition drew a distinction between mathematics as a model and the use of mathematics for empirical work um and um I don't know, you know, I don't see that I don't see um that that um it's it's it's quite correct because what I think the members of our side were arguing that a lot of empirical work is not a time series or a comparative series, uh, comparative, um, it's using history, um, in a non-mathematical way, um, to tell us something. about what happened before and I think the attempt to confine everything within the envelope of mathematical technique of one kind or another, whether a modeling technique or a statistical technique, is exactly where the issue goes wrong because it depends too exclusively on she.

I mean, on this last point I couldn't disagree more, I mean the wealth, the wealth of knowledge, that empirical work, that is, Pro sectional panel data, maybe a little less serious time, uh, but but. even serious time has given way is just extraordinary and I think Steve gave two very clear examples of that where we've used eon IST uh I've used econometrics to tell us things that are of first order importance about the world that we live in and I think economics is the right way to go for many of these questions and we are lucky to have this tool and it would be catastrophic if we lost it.

Yes, well, I mean we agree. By that I mean, is it the only way to go? continue? I mean, you seem to equate the empirical with the statistical. I think I've expressed my respect for the story, right? I think so, what story have you found worthy of respect? Can we uh? I think we want to have a little order here. I'd like to see if we can get some opinions or positions from the floor. We have little time. So can someone here lower the microphone to this fairly central position? Hi Yes. So one of the problems I find with Professor Skel's argument is really the centrality of economics to policy and by policy I'm defining it as something that is technically correct, so consider the problem of the central banker who wants to decide to increase policies. interest rates right there, you need it.

Don't you think we need some kind of framework that tells us, for example, how much the interest rate should be raised or lowered? History can tell us whether we should do this or not. Do you know if the FED should raise interest rates right now? It is a question that history should analyze in detail, but without rigorous econometric models of some type or another, without some type of theoretical framework to support us, how much does the FED increase interest rates? when, when you have to make this decision and what kind of basis we would give to such a question.

Are you asking me specifically or do you think things should be thrown out? If you know it right, of course, I mean, of course, you, you, you. I have to have a theory of what the impact of changing interest rates is, um, but that's been discussed. I mean, you have to know something about some people who argue that interest rate policy is actually relatively ineffective in its effect on prices or in its effect on the real economy, I mean, there's been a dispute that's going on now. , it seemed to have been resolved somewhat in the 2000s, when all macro policy was actually interest rate policy and you know, certain things happened. and that was a signal to increase your interest rate to increase the bank rate to others to let them, it turned out that that was actually not suitable, it was incomplete and now since the recession the arguments have started again, it has a zero limit , now what?

Do you do it now? The point is that you have to know something about those disputes and then you come to a judgment, of course data is very important and that includes quantifiable data as well, but then pure economic history and knowledge of the history of economic thought. It is absolutely essential for a central banker to reach judgment, and in fact, sensible central bankers who are not slaves to dead economists actually find that they use their judgment. I mean, I think it's a very interesting example of how statistics work and the historical work has been put together um the response in the US to the great recession in particular was led by a man who wrote mathematical models, estimated the relationships statistics and he was a scholar on the history of the depression and we We were very lucky to have that guy and he was wrong, you are talking about Bernard Beran and as an academic graduate I can only summarize my three years of university academic education as too much useless mathematics and very little story, if any, I mean, I'm not against Maath, as I'm sure none of us here are.

I really enjoy mathematics, but I am against over-reliance on one particular tool to explain all of economics. I mean, when can we students stop learning only about constraint optimization? which by the way is 19th century mathematics and start learning some other useful tools to understand the open complex adaptive system that we call economics, I mean where is the psychology, politics, history, sociology and of course also some real 21st century mathematics? Why do we add? I think that's a statement rather than a question, thanks. I wanted to react to a comment made by Professor Celli and try to differentiate between two debates, that of the assumptions in economics and that of the use of mathematics, but I think they are very linked in a way that the history of economic thought and teaches us. that the restriction of thinking quantitatively and wanting to do mathematical models in economics restricted the assumptions that can be used if economists like rational expectations so much.

It is because they are very convenient to model in the same way that if we assume selfish interest, it is because it allows us to have closed models, and the same would happen with some assumption of having rational behavior with some bias. It's still a simplistic view of human behavior that is very useful when you want to think in terms of Clos equations and models. Can I tell you that before rational expectations, even in the mathematical model we had adaptive expectations that are much easier to manage? So you know that was a move towards complication and by the way, I don't necessarily think that was an improvement in terms of the um possibility of the Assumption, so I think you know there are different ways. you know they're fine, so for example, you know critics of economics are really into something called agent-based modeling now, which is basically a mathematical model without optimization, okay, that completely eliminates the whole optimization part. , so it's a lot easier, it's actually a lot easier. have to have optimizing agents, so I think the statementthat the assumption driven by mathematical convenience is not correct, in fact you know that abandoning the adaptive expectation was a move toward harder math, harder models, using a model with optimization instead of something.

Like, agent-based models are more difficult. Thank you. Could you have another contribution from the public? Please, the person at the back, yes, hello, my question has to do with whether, let's say, we introduce greater theoretical pluralism into the study of economics. and if we study more history during economics that will probably change what graduate economists know and when they try to enter the job market what their employers expect them to know now, given that I guess employers I really like the mathematical approach because it's easier to implement in a model and, in turn, it is easier to sell it to clients in the financial market.

You can create a model that you like to predict things, at least in theory, so that's what I do. Do you think how economics is going to compensate in terms of getting money for study if we introduce more history and therefore decrease the mathematical sophistication of economics graduates? Yeah, can I get that right first? of everything, you know if, well, that problem with this country is that most of the employers are in the financial sector, so they are working with something more prone to quantification if you work at the auto manufacturer or you know another type of companies that uh, that kind of math might be less useful, I mean, you'll need math for engineering, but not for financial management, but the most important thing is that you know, if they really want a good mathematician, why would they hire Economist?

No, because there are real mathematicians. physicists are engineers and then we economists are like number four, you know, so we are the top four mathematicians, yeah, they don't necessarily want math from us, because if they really want math, they can hire real mathematicians, so economist needs to learn other things to be able to compete with those people and I think real world employers actually find people with a broader education. You know, I'm in Cambridge and I'm also involved with the center for development studies and I mean we produce PhDs in development studies that are interdisciplinary studies and those people have no problem getting jobs in the private sector at the World Bank or the United Nations United because they actually know a little bit more about the real world than the standard economist and I think that can be a strength, so this curriculum change, yeah, it might need a bit of an adjustment period because employers are going to say: "These guys are different, they are necessarily better, you know, they are more useful, but after a while I think they will come around, thank you." You, Mrs.

Judi Shapiro LSC, I would like to pick up on something that Robert Skeli said, which is that development economics needs little mathematics because the problem is governance and that is exactly why I couldn't support that side. I would like to know his reactions. to that even though we have agreed throughout the panel that we do not want the 20th centuryeconomics we want the economy of the 21st century and we want to bring it to the classroom, to the seminar room and to the conference room, and it is not just because they are colleagues of mine and I have to see them tomorrow and they are the best teachers we have.

I have at LSC is because I think Hajun Chang has been arguing tirelessly and very well and it's not necessary and he doesn't use econometrics for causality that flows in the opposite direction, that's how I understand his work and he was relentless and I was impressed uh I'm not necessarily going to apply it to Africa. I'd like to see an argument for that, but he said the evidence is that causality goes the other way: today's rich countries acquired most of the institutions. That is the dominant vision today that Robert Skel considers. To be prerequisites, I don't know what it is about governance either, we have to unpack that, which is what I think some of the randomized control trials are trying to do: political democracy, because Singapore doesn't have political competition, but it doesn't. having corruption, on the other hand, is important corruption and that is where I think the type of econometrics that Steve Pichy's books talk about and that is practiced is one of our ways forward and finally I also want to know your reaction on this It's a matter of not going from the particular to the general because we haven't gotten very far with the general, so it would be very good to see something about the particular where we delve deeper and discover, for example, one of the things that Franchesco Casselli works on about natural resources.

Damn, what happens there is not only a curse, but why and I don't think we can do that without econometrics, but of course you need smart econometrics, you need arguments on the Internet, which Hun Chang thinks is less important than the washing machine. this statement yes okay let's have a debate about it you and me at some point okay I shouldn't have gone into that let me finish because I want other people to do it with the idea that I can't trust you with my syllabus because I think You want both of you to do assertion economics and by the way I don't think your assertions win and I think evidence is very important and not just models but we need to test them we will never get a right answer but at least.

We will have a debate that will be based on evidence, not who has the strongest convictions, which by the way is one of the reasons we have five men on the platform. Thanks, I mean, emphatic statements based on false "or" propositions will always gain support in a political argument that was a political speech and didn't really mean, I mean, it was great, I mean, I enjoyed it a lot, but I don't think that really addressed the issues of no one is against the evidence and no one is against using um. using whatever tools you have available to obtain evidence to support your propositions.

I mean, nobody's against that, so I mean we're against that, what, what, what do I think I was saying when I did that. The claim that development economics does not need as much mathematics as other branches of EC economics was that the problem that many development economists have identified is the problem of governance and that it is not something that can necessarily be addressed or solved. just with a lot of data um you just can't do it I mean these are problems of political theory these are problems of institutions institutions how they work and the context of those institutions examples of the incentives that particular rulers face um and so on, I mean you just need a wide range of evidence to reach a conclusion.

It's so controversial that a reason to say ah we can't support you because you know. You said you need more than one tool, that's the question I asked you and that's not my intention. I didn't intend it to be a political speech. Yes, can I quickly add a point to that? Well, I guess that's what counts as evidence. It depends on your theory, so it's not totally independent of theory, so you know I was listening to a debate on the radio one time about alternative medicine and you know the standard type of doctor was insisting that we needed RCTs to prove that something works. and this, uh, acupuncturist who was British pointed out that, well, actually in acupuncture there's no point on the body where you can randomly put a pin, you know the pin and it has no effect.

Every point has an effect, yeah, so there's no kind of uh. acupuncture equivalent to PLO, yes, so if you have that kind of philosophy, then the RCT doesn't necessarily establish evidence as well. You know, what I'm saying is that you basically need different layers of evidence, yes, you need cross-sectional econometrics. You may need that time series, you may need panel data, but then you need the historiography, you need that anthropological approach, you need the surveys, you know you need the structured interviews, you know all these things, you need to work together to create that solid evidence, unfortunately.

These days we say you know, unless it's econometrics, so RCTs are not evidence. I find it very problematic, yes, can you explain to me how the other methods solve the problem of acupuncture? No, no, that's just an illustration, but you know. I already gave an example, it was a bad illustration, no, no, how does your message solve it? No, that was an illustration of how your theoretical position actually affects what you count as valid evidence, yeah, so that was anywhere and does something, so it's very difficult to figure out what acupuncture does. I'm sorry, what can't you have with some guys you don't hit and then the guys don't, but their bodies are different?

You know that's the problem, yes, but more seriously, you know that these others. Proof is needed. I already gave you an example of Korea that has this 40 currency rationing by the government, which makes that tariff rate meaningless, so unless you know how these different countries work, you won't understand. I mean, there were people in the 1980s doing regressions trying to show that the ratio of that pitiful industrial subsidy spending as a ratio of GDP had a negative or positive effect on industrial performance. Yes, unfortunately, what they didn't understand was that in countries like Japan industrial policy was not carried out primarily through subsidies as it was in Europe, yes, so if you don't know that evidence, you will treat Japan exactly the same as to European countries, which creates a problem, but you need that other knowledge to even do intelligent econometric research, but that's just saying that better done academic work is better than poorly done work we can, yes, yes, no , but what is better.

I mean, there's a question at the end here, yeah, well, probably because of this eist reference, but I went in. I'm kind of interested in this distinction between the particular and the general and I can't help but remember the work of Carl Poer or Berton Russell and that's the story of the inductivist turkey, so I want to ask Professor Geli because I think that after all this is a kind of false dilemma of history and economics uh I think there is something before that and it is the empirics and you mention that you started your presentation talking about history as a personal good or the empirics. what happens with the personal uh the data given is to consider that the way an economist or social scientist would take the empirical data or the data as given is what you suggested yeah I mean the way I think it is a journey that begins. with data and it ends with data um, uh, you start with the observations that are often no.

I understood that my question is if data is given or if it is a historical construction or if it is like that. You already know part and part of his epistemic. and that is the story of the inductivist turkey or the failed aunist uh uh, what do we start from observation? That observation is exogenous and completely external to us, or it's historically determined, you know, and that's a problem with economic history because we can't witness the data. we have to work with the data that they give us yes, yes, I can, the question was for me, so I'll try um, I mean, look, there's um, we could spend hours and hours, uh, discussing all the things. that are wrong with the data that we have um and and then we can also spend many hours thinking about whether the things that are wrong with the data are wrong by Design or are wrong by accident um I I I mean just um I don't have the patience for, um , my hunch is that, you know, I'm a microeconomist, so a lot of the data I work with is national accounts data.

My hunch is that national accountants are doing the best they can with a huge amount of problems and they don't understand it perfectly, but I think there is information they give us. If you'll allow me, I'm not going to go to the 1990 Gary K dollars, but I'll ask you why then. In the case that all economics articles end up predicting, I mean, the results are as predicted and there is usually no attempt to bias or falsify the model or hypothesis, that is simply not the case, simply not, No, this is not the case. that's not all, I mean empirical articles, you mean empirical articles, yes, no, I mean there are a lot of negative results, people say poor is zero, come in, I mean, I think it illustrates kind of a point of important difference, you say that the economy begins. with data and ends with data I say starts with Theory and ends with Theory um and none of the economic theories that we are familiar with emerged as a result of direct observation um uh, they just didn't, it was and a very good example is expectations adaptive that end with rational expectations.

It's a theory, um, questioning another theory and the whole debate takes place within the world of the theory and the observation had very, very little to do with that particular transition. It is my duty to end the debate. I want to ask both sides to give a very succinct summary of the key points before we vote on it, so I'd like to take a little time torefute your last point. I just don't agree Probably the most fundamental change in economics in the last 30 years is behavioral economics, the way economists have begun to think about how people make decisions, what kind of information they have, how they process it, what's going on, what kind of preferences they may have. and that came about largely because, when economists in the '70s and '80s turned to game theory, other people went back to doing experiments in laboratories, which we didn't invent, but we learned from psychologists, and I have a lot of simple results of game theory.

Rejected if you have people playing in the lab, so after a while some ISTs got tired of that and started thinking about different models and that has been the biggest change in economics since I've been in the profession and a large fraction of the Current work has behavioral economics trying to incorporate that knowledge into more conventional models, etc., so I think this view that economics is just a theory that doesn't respond to evidence is so false that the bottom line is that what you're saying, well, someone has it. having the last word, okay, so one thing I agree with is that it's probably true that the washing machine was more important than the Internet, and I sympathize with the way it looks.

I think the fundamental problem I have here is the same as what Steve said. It is, and I have it very often when I hear events like today, which is that the description of the economy as I leave it day to day is very different from the description that I hear from critics. It's not this obsessed theory. math obsessed discipline, I mean, Steve showed you the data, actually right now it's an empirically obsessed discipline if anything and uh and it's not uh it's not driven by math, it's driven by observation uh and it's driven by a sincere desire to explain facts that happen out there and the mass is simply incidental to that process.

Many thanks to those who are in favor of the proposal now for their final and succinct summary. Yeah, um, two, two observations. I mean, I think you know some of the examples given about, for example, the effect of rising wages on work effort. I mean, you know, you think one thing: you think that people will work longer hours as their wages increase. increase, but then it was discovered that there is also a leisure option in everyone This now, you don't need any modern economics or contemporary economics to understand that people actually make these decisions John Stewart Mill realized that in 1844 without any mathematics and so I see a lot of this, a lot of modern work like Reinvent the Wheel, an endless reinvention of the wheel, that's the nature of the subject, period and every generation, people have not been doing economics for a long time, but who only studied in the '80s.

I mean, they'll say no, look, we've done fantastic. Advances, I mean all those things that were fashionable 10 or 20 years ago and are now irrelevant because we have behavior, we are now doing different types of better types of econometric work and therefore we advance, I think we will, um uh. This is cyclical and we will do it, so no, I do not accept that the SEC. The second point is that I noticed that Professor Pisher used the word frictions at one point when talking about the job market. Where does the word friction come from? Of course. It comes, it comes from physics and engineering and that's the model that economists will always have if things don't go the way that maybe theory tells them they should, they will always introduce friction and that's exactly the mentality I'm disputing thank you, Well, let me, yeah, let me make two points, you know, the proposition is that there's too much math and too little history, yeah, you know, we're not saying we should abolish math, you know? we should turn economics into history no, I'm not saying you don't, I'm such a pluralist both in terms of theory and methodologies, you know, I mean, I never use mathematics in my work, but I'm not saying that people shouldn't do mathematics, yeah, I mean, people should do math, yeah, we just need the division of labor, yeah, that's our way, economics, that's where economics started, right?

Yes, the first thing that Adam Sim wrote was the division of labor, so that's the origin of economics, yes, so we should practice that, yes, yes, so that some people should do mathematics, some people should do econometrics, others surveys, interviews, historiography, everything, yes, and we need all these different theories to fully understand the world, yes, so there's really nothing to do. dispute in the proposition, yes, because that's that, it just says that, since we're actually doing too much math, yes, yes, and I think very few people will argue that you know because you know that yes, if we had nine lives, would you?

Why don't everyone convert? You are a first class mathematician as well as a historian, and you also know the interviewer, etc., but we don't have enough time for that, yes, so somehow we don't have enough time for that, yes, thank you, yes, one last time. comment I mean, we need to think about the cost-benefit ratio we get from this math. Yeah, I mean, will we get enough benefit given the cost the student has to spend to learn all this? Let's leave that gratitude on my agenda. I'm forced to deal with some voting, I'm not quite sure how, but those who are in favor of the proposal, too much math and too little history, will raise their hands and I will count, speak, yes, if so.

We are in favor of the proposal, there is too much math, too little history, but after a quick recount, I think we should consider that those who are against the proposal feel good about estimating what their intuition is. I think it's a nice, clean fight. I'm not sure the better side won, but uh, um, I'll let the students make the announcement. I think thank you very much for coming, thank you to the speakers, so thank you again to our distinguished panel who gave their time to fight today. uh, without leaving blood on the floor. I'm really glad to see if you wouldn't mind moving to the auditorium and taking all your things with you.