The Myth of the Economics Algorithm
On The Freeman Online, William L. Anderson shows us, using a football analogy, how unpredictable the real world can be:
. . . a mathematical formula cannot tell us what the U.S. economy (or any other economy) is going to do next year; nor can an algorithm tell us exactly how much revenue a new tax will collect, no matter what the Congressional Budget Office and Paul Krugman tell us. (A computer spits out the results, but it only operates according to the formula someone programmed into it.)
I am not denigrating mathematics per se; there is a place for math. However, there are legitimate reasons that using math in the way economists currently use it will result in failure.
. . . . Economists once understood this point [that “one cannot put the freedom of enterprise (that quickly is disappearing in this country) into an equation and then predict an iPod or iPhone with it”], but the lure of mathematics was too great. Paul Samuelson at mid-century wrote that unless economics adopted the mathematical analysis of the physical sciences, economists would not be true scientists, which would place their work into the undesirable category [Ludwig von] Mises called “metaphysics.” While Mises, F. A. Hayek, and Murray Rothbard pointed out the folly of trying to fit the square peg of economic analysis into the round hole of math, other economists derided them and declared that mathematics should dominate economics because it “fits the market test.”
Anderson’s article — “Algorithms Can’t Pick College Football Champions or Predict Economies” — is here.