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Michael Hudson: ISLET (Institute for the Study of Long-term Economic Trends), Forest Hills, New York, USA
ACKNOWLEDGMENT: The author would like to thank Hans Maks and Peter Senn for their helpful suggestions that have been incorporated into this paper.
"There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy (Hamlet, Act I, Scene v)."
"Whoever enters here must know mathematics". That was the motto of Plato's Academy. Emphasizing the Pythagorean proportions of musical temperament and the calendrical regularities of the sun, moon and planets, classical philosophy used these key ratios of nature as an analogue for shaping order in society's basic proportions. The population's optimum size, the city's geometric shape and its division into equal "tribal" fractions for voting and fighting in the army were mathematically idealized. But there was little quantitative analysis of economic relations, and certainly no thought that unregulated market forces would assure social harmony. There was no statistical measurement of the debts that wracked the Greek and Roman economies, or of overall output, its distribution and value.
We now have such measures, but can we say that mathematics provides the key to understanding the major economic problems of our time? More specifically, has the marginalist and monetarist application of mathematics become so nearsighted as to lose sight of the economy's structural problems?
The education of modern economists consists largely of higher mathematics, which are used more in an abstract metaphysical way than one that aims at empirically measuring society's underlying trends. It is now over a century since John Shield Nicholson (1893, p. 122) remarked that "The traditional method of English political economy was more recently attacked, or rather warped", by pushing:"the hypothetical or deductive side ... to an extreme by the adoption of mathematical devices ... less able mathematicians have had less restraint and less insight; they have mistaken form for substance, and the expansion of a series of hypotheses for the linking together of a series of facts. This appears to me to be especially true of the mathematical theory of utility. I venture to think that a large part of it will have to be abandoned. It savors too much of the domestic hearth and the desert island."
If today's economics has...