Teaching Economics Without Calculus

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bhobba said:
Actually math is central to that - as I explained in another post it was caused by too much faith in beautiful mathematics used in securitising low grade investments and greed clouding what should have been done ie carefully checking the math they were using.. High profile experts like Mandelbrot did and warned about it, but with dollar signs clouding their vision he was ignored. He has seen it all before. When he was a junior researcher at IBM someone come up with a surefire way to make money on the stock market. They ran simulation after simulation and it never failed. But as a final check they gave it to him and he spotted the issue immediately - they did not take into account transaction costs. When that was done it failed. That is not to say math can't be used for such things - look into a mathematician called Jim Simons - you will find it interesting.

Thanks
Bill

Yes, that was my point, just as you cannot reduce an the causes of WW1 to some mathematical analysis, there was no math used in your explanation of what caused the financial crisis.
 
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BWV said:
Yes, that was my point, just as you cannot reduce an analysis of the causes of WW1 to some mathematical analysis, there was no math used in your explanation of what caused the financial crisis.

I gave it my like - but IMHO its cause was too much FAITH in flawed math. Math doesn't explain why you would do that - but it was indeed caused by faith in flawed math. So in one sense you are correct - in another not.

Economics can use math to explain what a rational person should do but not why they can be, and often are, irrational. I was speaking to my doctor yesterday and he mentioned Freudian Analysis has been totally discredited yet especially in the US tons of Psychiatrists use it. Board Certified Psychiatrists must pass exactly the same exam as Neurologists in the US - they are no dummies - yet many use a totally discredited method. What is the modern approach? Well aside from diseases caused by a brain chemical issues eg bipolar disorder, it's to find something that simply is not logical. The tension and worry because they really know its illogical, is what needs to change to fix it. I have a number of those but that is getting way off topic. When you realize that you see math can never explain human behavior, just help in finding the best behavior if you are rational. Many are not.

Thanks
Bill
 
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Yes, but I would argue that every actor in the mortgage supply chain, from the borrower to the mid-level bankers to the corporate execs to the institutional investors who bought the paper acted rationally under the incentives they had at the time

Not arguing that the economic models of rational behavior (which employ calculus) are not useful, but they are not the analogs of physical theories

in physics, the usefulness of your model is not impacted by other physicists trying to game it
 
The last post was on Tuesday, its now Sunday so I think it can now be closed. Its been milked pretty dry IMHO. But of course if anyone wants to add something drop me a line.

Thanks
Bill