Saturday, April 8, 2017

Alfred Marshall's support for realism in economics


Alfred Marshall is one of the most influential economists of all time and best known for publishing the popular textbook Principles of Economics in 1890. Because of this book, Marshall is widely regarded as the father of neoclassical economics. Marshall's student Arthur Cecil Pigou once said,
Though a skilled mathematician, he used mathematics sparingly. He saw that excessive reliance on this instrument might lead us astray in pursuit of intellectual toys, imaginary problems not conforming to the conditions of real life: and further, might distort our sense of proportion by causing us to neglect factors that could not easily be worked up in the mathematical machine. (Memorials of Alfred Marshall)
Referring to Marshall's contribution to neoclassical economics, John Maynard Keynes said,
William Stanley Jevons saw the kettle boil and cried out with the delighted voice of a child; Marshall too had seen the kettle boil and sat down silently to build an engine. (Essays In Biography)
Similar to today's heavyweight macro econ critics, Marshall is was a proponent of realism. I'm always delighted to see when historical figures in economics understand what the purpose of economics really is and have a healthy skepticism of abstract theories The quotes below are meant to paint a picture of Marshall's philosophy of economics.

Support for realism


"I had a growing feeling in the later years of my work at the subject that a good mathematical theorem dealing with economic hypothesis was very well unlikely to be good economics and I went more and more on the rules - 1. Use mathematics as shorthand language, rather than as an engine of inquiry. 2. Keep to them till you have done. 3. Translate into English. 4. Then illustrate by examples that are important in real life. 5. Burn the mathematics. 6. If you can't succeed in 4, burn 3. This last I do often," (Letter to A. L. Bowley, 1960)

"There has always been a temptation to classify economic goods in clearly defined groups, about which a number of short and sharp propositions could be made, to gratify at once the student's desire for logical precision, and the popular liking for dogmas that have the air of being profound and are yet easily handled. But great mischief seems to have been done by yielding to this temptation, and drawing broad artificial lines of division where Nature has made none." (Principles of Economics, 1890)

Complexity economics


"The laws of economics are to be compared with the laws of the tides, rather than with the simple and exact law of gravitation. For the actions of men are so variable and uncertain, that the best statement of tendencies, which we can make in a science of human conduct, must needs be inexact and faculty." (Principles of Economics, 1890)

"Though a simple book can be written in selected topics, the central doctrines of economics are not simple and cannot be made so." (AZ Quotes)

"Nature's action is complex: and nothing is gained in the long run by pretending that it is simple, and trying to describe it in a series of elementary propositions."

Econometrics


"The most reckless and treacherous of all theorist is he who professes to let facts and figures speak for themselves." (AZ Quotes)

What is economics?


"Political Economy or Economics is a study of mankind in the ordinary business of life." (AZ Quotes)

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