Paul Samuelson, RIP
I never was a fan of Samuelson, and while I will try not to speak too much ill of the recently departed, nonetheless I think the guy was bad for economics and he leaves a legacy of economic wreckage and bad theory. However, I will concentrate today on one of his legacies: the transformation of economics from something that an educated layperson could understand to a branch of inferior mathematics.
I started out as an econ major and got a hefty dose of Samuelson. Then, of course, there was business school. If Samuelson turned economics in "a branch of inferior mathematics" then B-schools take it a step farther. The curriculum is chock full of inferior (micro)economics.
From day one, i had the same nagging questions when i looked at the elegant equations and models: "where do we get the data to use these"? As taught they were paragons of precision and mathematical rigour. Unfortunately, they depended on convenient assumptions (e.g. we know the exact price elasticity of oats). Out in the real world, you cannot make those convenient assumptions-- you have to work with incomplete, decaying information. The complex modeling.... just a form of ego-stroking.
In a real sense, much of the mortgage bubble was driven by this naive belief in the power of mathematics and models and their refusal to deal with the limits of that power. (I don't recall my professors spending a lot of time discussing the limits of the methods they taught us.)
See here:
Recipe for Disaster: The Formula That Killed Wall Street
Is This an Analytics-Driven Financial Crisis?
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