The Continuing Crisis of Economics --- John Nye on Doug North, Theorists vs. Modelers, and Giants and Pygmies in Scientific Progress

|Peter Boettke|

Earlier this fall Washington University in St. Louis hosted a wonderful conference honoring Douglass North and his work.  My colleague John Nye, a longtime close colleague with North, spoke on the continuing crisis of economics and the dilemma with respect to the acceptance of New Institutionalism.  It is in my opinion a brilliantly delivered talk that is full of important insights.

 

Comments

[Colin]

Well, i didnt really follow most of that, but the speaker has an interesting twitch, where he looks like he is going to adjust or remove his glasses, but he just waves his hand there. It seemed to become more pronounced as he became more passionate. Thats all i have to add to this discussion.

[Rafael Guthmann]

From the little reading that I did on papers published in the last 70-80 years in the top journals, I had noticed that they continuously became more formal, more sterile and less interesting as the decades passed. Maybe is the principle of diminishing returns manifesting itself on the scientific production inside a certain paradigm.

[Doug Watt]

John makes the point that "formal" theory is not needed for the majority of empirical study. To me this begs the question: what is formal theory needed for? I was taught that the strength of neo-classical economics is that it provides testable hypotheses.

[Rafe Champion]

Taking up Nye's comments on the pitfalls of the mathematical approach, this is a nice piece.

http://www.the-rathouse.com/2010/Schwartz_on_mathematics.pdf

The point is that mathematics has to deal with well-defined situations and in science mathematics can only be usefully applied after the science side of things has been sorted out to the point where simplification can be achieved without losing touch with reality. Or at least where the departure from reality is clearly undestood so that the results of the analysis are not confused with reality itself.

“Give a mathematician a situation which is the least bit ill-defined — he will first of all make it well defined. Perhaps appropriately, but perhaps inappropriately.The hydrogen atom illustrates this process…with the danger that…the mathematician turns the scientist’s theoretical assumptions, i.e., convenient points of analytical emphasis, into axioms, and then takes these axioms literally. This brings with it the danger that he may also persuade the scientist to take these axioms literally…In this way, mathematics has often succeeded in proving, for instance, that the fundamental objects of the scientist’s calculations do not exist.”

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