2.3.2. methodological approach

Concerning the title of fundamental books of economics it is not only the title that surprises us, but the fact that these title are misleading.

Adam Smith, Wealth of Nation
David Ricardo, On the Principles of Political Economy and Taxation
Jean Baptiste Say, Traité d’économie politique
Alfred Marshall, Principles of Economics
Léon Walras, Elements d'Economie Politique Pure
Vilfredo Pareto, Manuale di Economia Politica

Only the book of Adam Smith has a different name, although one could wonder if he describes what makes the wealth of nations or the mecanisms that leads to wealth, see an economic perspective.

The notions political economy, économie politique are only comprehensible in historical context, because none of this books deals with "politics", in other words with the relationship between politics and economy. (If we put aside the inherent assumption that politics shouldn't interfere at all in the economy.)

Wikipedia defines the term political economy in the following way.

Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth. Political economy originated in moral philosophy. It developed in the 18th century as the study of the economies of states, polities, hence the term political economy.

Following this explanation in former times economy as a science didn't exist and was a branch of law, moral philosophy etc.. The first economists kept the title, but eliminated politics.

Léon Walras analysis under very narrow assumptions, see market where products are exchanged / markets where products are produced, equilibriums, but his assumptions are so strange, that he gets to completely wrong results.

In the simplified version we find nowadays in textbook about microeconomics, microeconomics is pure "neoclassical" theory, almost all Alfred Marshall, and is all about equilibriums. Concerning Léon Walras that is actually true. He has only one topic: Equilibriums. Concerning Vilfredo Pareto it is not true, because Vilfredo Pareto is more about something that could be defined as "sociology". Alfred Marshall discusses a broad range of issues. However politics doesn't have any impact in their theories. They assume that the economy works best if there is no governmental intervention at all.

This is in any case a statement that very little people share. It may appear strange, but almost anybody believes, without really being able to give a proof for that, that governmental intervention can resolve problems better. At the other side it is strange that we don't find any remark about political mouvements in the books of the so called neoclassical authors.

Alfred Marshall is the only one who doesn't use the term politics, the title of his book is just Principles of Economics, however Alfred Marshall addresses a broad range of issues, which indirectly have to do something with politics or at least with changes in the social structure.

In Germany, as in any other country, economics was part of laws, philosophy, sociology, the term "political economy" or something similar was only used by some authors, for instance Karl Marx and Max Weber and these authors indeed took into consideration social and philosophical aspects as well. Carl Menger titled his book "Grundzüge der Volkswirtschaftslehre", what would be something like Principles of the economy of nation, although the whole book has only one issue, the subjective value.

The situation is different in the so called classical theory.

David Ricardo analyses in detail the impact of taxes on the accumulation of capital, the only issue he is interested in, distribution of the national income is not even worth to be addressed. The famous comparative costs, which state that trade between two countries is beneficial even in the case that one country is less efficient than the other in the production of all products, is only a remark of half a page.

Jean Baptiste Say assigns to the government more or less the same tasks as Adam Smith: internal security, defense, public education, jurisdiction. He gives a lot of examples for devastating effects of governmental intervention, but none for a positive impact.

The only author that criticises governmental intervention from a systemic point of view is Adam Smith.

The explicit or implicit critique In the classical / neoclassical theory of governmental intervention if efficiency. If the market leads to the optimal allocation of resources, there is nothing that can be improved by governmental intervention.

That changes with neoliberalism. Governmental intervention is not only inefficient, but is a risk for freedom. The title of one of the most famous books of Milton Friedman is "Capitalism and Freedom".

Only in the ordoliberalism the government has to play an active role in the economy. He has to ensure that the intensity of competition is high enough.

We have therefore a strange kind of situation. If politicians would do what economists advise them to do, to stay out of the economy and not to intervene, both, politicians and economists, would lose their jobs. Economists consider advising the government as their main task and we have therefore thousand of "think tanks", public subsidised "scientific" institutions, informal organisations and pressure groups who earn their living advising politicians, although most of them believe that the government should do nothing. If the government would do what they fervent followers of Hayek want it to do, they would all lose their jobs and the most fervent, those who are really fighting for the liberty of mankind, would even lose the meaning of their lives.

Politicians and economists live in a strange kind of symbiosis. Politicians have to intervene, otherwise they have no job and economists need someone who intervenes in order to be against intervention.

If we read the following paragraph, we understand perfectly why Léon Walras is against what he calls the literary method. In the case of Léon Walras the literary method leads to a way of thinking that is nothing more than free associations.

C'est une vérité depuis longtemps mise en lumière par la philosophie platonicienne que la science étudie non les corps, mais les faits dont les corps sont le théâtre. Les corps passent, les faits demeurent. Des faits, leurs rapports et leurs lois, tel est l'objet de toute étude scientifique. D'ailleurs, les sciences ne peuvent différer qu'en raison de la différence de leurs objets, ou des faits qu'elles étudient. Ainsi, pour différencier les sciences, il faut différencier les faits. The philosophy of Platon demonstrated already a long time ago that science doesn't study the bodies, but the facts of which the bodies are only the theater. The bodies pass by, but the facts remain. The facts, the relationships between this facts and the laws are the object of studying of science. One science only distinguish itself from another to the extent that the object of study distinguish from one another or to the extent that there is a differnce in the facts they study. In order to find the differences between the different science, it is necessary to distinguish between the facts.

Léon Walras, Elements d' economie politique pure ou theorie de la richesse, 4° LEÇON Distinction entre la science, l'art et la morale.

More or less Platon told something like that, at least he can be interpreted that way with a bit of let's say generosity. The problem is, that this has little to do with the question of the methods to be used. The question is whether the relationship between cause and effect or at least between one effect and another is stable or not. Depending whether it stable or not different kind of methodological approach has to be used. In case that it is stable, we can work with mathematical equations, in case that we have only tendencies, we can use statistics and when it comes to describe qualitative changes, we can only describe them verbally.

Stable relationships, relationships that never change in space and time, are, at least if they are not completly trivial, inexistent in economics. Beside that, mathematical modeling in economics is based on monetary variables, but monetary variables are always only the effect of something, but not the cause. We can say that the lower the price the higher the demand, but this doesn't explain the causal relationship.

(And very often it is not even true. People for instance are very often willing to pay MORE for the same product, for instance eggs, if the way this eggs are produced correspond more to their ideas about ethic question. The same is valid for the supply side. In every textbook we find the supply curve, actually the curve of the marginal costs, which suggests that the amount increases with the costs. However the internet shows the opposite. There are millions of website, worth billions of dollars, which are free.)

Saying that science studies facts, in reality he means causal relationships, means absolutely nothing. If a physicist calculates the velocity necessary for a satelite to keep it in the orbit he uses a different methodological approach than a psychologist studies the coping strategies of the people.

The physicist will resolve the problem with mathematical equations who are model of the stable causal relationship, the second will use statistics to find out some relevant factors (income, education, amount of friends etc..).

In the next paragraph he says something that is actually true, there are different types of "fait", although he means causal relationships and not facts. However the conclusison he draws from that are completely misleading. The question is not whether the "fait" depends or not on human will, but if they are stable and predictible.

The theory of evolution is at least the basis of scientific theories, although there is still a foundation at the molecular biological level needed. However the theory only describes the result of a given order, but the order itself is modified by the results of this order. The human will is not the problem, the problem is, that the results are unpredictable. Something like "evolution laws" don't exist.

The case of economics is somehow similar. In economics we have a certain order and this order sets some incentives and therefore in the short run human behaviour is predictable. However human behaviour changes as well the order and even if the incentives remain the same the alternative to react on this incentive can be different. (Quite apart from the fact that human beings can indeed for moral reasons do something different than what is expected by the incentive. Some people for instance die for their country and other strange ideals, albeit it would be more reasonable to stay at home, earn money and do something productive.)

Léon Walras distinguishes between natural laws, which he assumes stable, and laws that depends on the human will, which he assumes unstable and unpredictable. That's not the point. The point is, that very often we have the situation that result depends on a given order, but the result of the order changes the alternatives. Expressed in philosophic terms we have a subject <=> object dialectic.

To illustrate it with an example: Some technologies, for instance the internet, can have such an heavy impact on the whole economy that the rules of the game change completely. The incentives may be the same, but the alternatives are very different. Powerfull corporation like the mass media are reduced to nothing and new companies, like google, become giants. This is going to have an impact on the alternative of the people. Hundred of new professions are created and others disappear.

Or, tout d'abord, les faits qui se produisent dans le monde peuvent être considérés comme de deux sortes : les uns ont leur origine dans le jeu des forces de la nature qui sont des forces aveugles et fatales ; les autres prennent leur source dans l'exercice de la volonté de l'homme qui est une force clairvoyante et libre. Les faits de la première espèce ont pour théâtre la nature, et c'est pourquoi nous les appellerons faits naturels; les faits de la seconde espèce ont pour théâtre l'humanité, et c'est pourquoi nous les appellerons faits humanitaires. A côté de tant de forces aveugles et fatales, il y a dans l'univers une force qui se connaît et qui se possède : c'est la volonté de l'homme. Peut-être cette force ne se connaît-elle et ne se possède-t-elle pas autant qu'elle le croit. C'est ce que l'étude de cette force peut seule apprendre. Pour le moment, peu importe: l'essentiel est qu'elle se connaît et se possède au moins dans certaines limites , et cela fait une différence profonde entre les effets de cette force et les effets des autres forces. Il est clair que, pour ce qui est des effets des forces naturelles, il n'y a rien autre chose à faire qu'à les reconnaître, les constater, les expliquer, et que, quant aux effets de la volonté humaine, au contraire, il y a lieu de les gouverner. Cela est clair puisque les forces naturelles n'ont pas même conscience d'agir, et, bien moins encore, ne peuvent agir autrement qu'elles ne font , et puisque la volonté humaine , au con- traire, a conscience d'agir et peut agir de plusieurs manières. Les effets des forces naturelles seront donc l'objet d'une étude qui s'appellera la science pure ou la science proprement dite. Les effets de la volonté humaine seront l'objet d'une étude qui s'appellera d'un autre nom, soit l'art, soit la morale, comme nous le verrons tout à l'heure. Ainsi se justifie déjà la distinc- tion de Ch. Coquelin entre la science et l'art. L'art « conseille , prescrit , dirige » parce qu'il a pour objet des faits qui prennent leur source dans l'exercice de la volonté de l'homme, et que la volonté de l'homme étant, au moins jusqu'à un certain point, une force clairvoyante et libre, il y a lieu de la conseiller, de lui prescrire telle ou telle conduite, de la diriger. La science « observe, expose, explique » parce qu'elle a pour objet les faits qui ont leur origine dans le jeu des forces de la nature, et que les forces de la nature étant aveugles et fatales, il n'y a pas autre chose à faire à leur égard qu'à les observer et à en exposer et en expliquer les effets. Los hechos del mundo pueden agruparse en dos tipos distintos: The facts of the world can be divided into two groups: The first ones have their origin in the natural forces which are blind and fatal, the others have their origin in human activities which are the expression of his will, which is conscious and free. The first ones have the nature for scenario, that's why we call them natural forces. The forces of the second groupe have humanity for escenario, that's why we call them human facts. In between of such a lot of blind and fatal forces in the universe is one who is conscious of itself and which can be controlled: the human will. Perhaps it is not as conscious of itself as we believe and can't be controlled as it is believed. Only a detailed study of this force can clear this point, but right now this is not important. What counts is the fact that at least in a certain degree it is conscious of itself and can be controlled. It is obvious that when it comes the natural forces there is nothing that can be done but accept them, know them. But the effect of the human will by contrast can be controlled. This is obvious because the natural forces doesn't have a consciousness of their effects and still less they can react otherwise than as they do. In oposite the human will is conscious of his will and can act in a different way. The effect of nature are therefore the object of a science that we call pure science or real science. The effects of the human will are the object of a science which we call art or moral, as we will see soon. Therefore the distinction of Ch.Coquelin between science and art is justified. Art advises, commands and controlls because its relations, which have their origin in human behaviour and this is, like the will, at least at a certain degree, a free force and therefore it is possible to command and controll it. Science observes, describes and explains because its objects are facts which derives from the free play of forces of nature and due to the fact that these reasons are blind and fatal nothing can be done but observe them, describe them and explain the effects.

Léon Walras, Elements d' economie politique pure ou theorie de la richesse, 4° LEÇON Distinction entre la science, l'art et la morale

Well, the first problem with this statement is obvious. LÉON WALRAS DESCRIBES THE MARKET AS IT WERE STEERED BY NATURAL FORCES. There are no human decisions and no will, nowhere. Nobody takes a conscious decision in his market, resources are allocated by similar stable forces that makes turn the moon around the earth.

The aversion of Léon Walras against the "méthode littéraire", that how he calls any other method that uses more than mathematical equations, is comprehensible. Someone who is not able to explain in plain words in a precise way what he wants to say, that is the case of Léon Walras, has an obvious intereste to present this failure not as a personal problem, but as a problem of the "method" used.

If the forces are conscious, unconscious, blind and fatal or controlable is irrelevant in this context. The only interesting point is if the relationships between causes and effect or at least between effect and effect are stable or not. If they are stable than can be mathematically modelled, but the mathematical modell will not be better than the theory the mathematicall modell is based on and only in the case that all the relevant variables are taken into account the mathematical modell can be tested against reality.

What Léon Walras actually describes with his mathematical equations, as he admits himself at the end, see markets where products are only exchanged and markets where products are produced, are, as all economic "laws", trivialities.

The sophisticated critique of the ceteris paribus clause, the assumption that all the variables and parameters not taken into account in the modell don't change, considers the ceteris paribus clause as a kind of strategie of immunisation. In other words, due to the fact that always something changes, the theory based on the ceteris paribus clause can never be tested against reality, because it is always posible to say that the theory is right, but the test fails because something changed.

There is no need for such a sophisiticated refutation of the ceteris paribus clause. Reality is much simpler than that. The "law" of the decreasing marginal utilitiy, to take an example, is always true, because it is trivial. It is true even for the living beings on the Venus (if someone lives there). Whatever they eat, they will reach a point where they have eaten enough and if they get their energy directly from the sun, they will reach a point where they have enough energy and if the make photosynthesis, at a certain point they are green enough. For laws in economics they are no ceteris paribus clauses needed, because they are trivial.

To give another example. If the analysis is based on a market where products are only exchanged but not produced, there is no ceteris paribus needed. It is obvious that in this case the supply and demand will be balanced by the price, because the amount can't changed and in the short run nothing changes.

Concerning economics we can only say that people react on incentives given. In other words, they will try to maximise their benefit, whatever they consider as benefit: money, utility, help other people etc.. See homo oeconomicus. However the fact alone that they react on the same inventive doesn't mean that they react the same way. Depending on their education, knowledge, personal experiences they will evaluate a situation in different ways and react in a different way. As a TENDENCY we can prognostic what they will do, but outside the trivial parallel world we find in textbooks, their behaviour is not steered by laws, although Léon Walras, see markets where products are only exchanged and markets where products are produced, assumes the opposite. He departs from the idea that prices alone balances supply and demand and that the question whether an economy is in equilibrium or not is the only interesting question.

His problem is that he confuses "l'economique politique pure" with "la valeur d'échange". In other words, he assumes that economics is all about the exchange value. (Under very restrictive conditions and strange assumptions, as we will see later, see markets where products are only exchanged and markets where products are produced.) It is true that in this case the problem is so trivial, that it can be mathematically modelled.

Si l'économie politique pure, ou la théorie de la valeur d'échange, c'est-à-dire la théorie de la richesse sociale considérée en elle-même, est, comme la mécanique, comme l'hydraulique, une science physico-mathématique , elle ne doit pas craindre d'employer la méthode et le langage des mathématiques. If pure economics, or the theory of the exchange value, in other words on the theory of wealth is a science mathematical-physical science, as mechanics, hydraulics there is no reason to be afraid of using the methode of mathematic language.

Léon Walras, Elements d' economie politique pure ou theorie de la richesse, 6° LEÇON, Du fait de la valeur d'échange et delà théorie de la richesse

It is to assume that most of academic economists are at the same low level, although they don't make the mistake to explain their method, because they are not even aware that there is a problem. It is of course true that if we abstract from anything that cannot be modelled mathematically we get at the end something that can be modelled mathematically.

His simple theory of the exchange value, the amount of products is fixed and the market must be cleared at the end of the period considered, is indeed something similar as hydraulique. If the amount is fixed and nothing changes, what is the case in a market where products are only exchanged but not produced, in other words in the very short run, only the price can balance supply and demand.

[However even with this simple system Léon Walras was able to get to confusing results. He assumes, another strange assumption, that the wage is fixed and concerning the wage the amount of labour offered balances supply and demand markets where products are only exchanged and markets where products are produced.]

If we say that the quality of a novel can be measured by the amount of pages in relationship to the price we can get easily a mathematical modell allowing us to determine the quality of a novel. The higher the quotient amount of pages / price the better the quality. That is obviously stupid, but that's the intelectual level of the walrasian argumentation.

Economics is not only about exchange value and equilibrium. We can even say that equilibrium is the most irrelevant thing on earth in this context. The walrasian logic, being trivial, is always true. That's not an advantage, that's a problem. We have equilibrium in the USA, in Sudan, in Germany and in Kongo. But we don't care. What we really want to know is why the LEVEL of this equilibrium is different. In other words, we want to understand the dynamik of the economy and why the equilibrium in Afghanistan is at subsistence level and in Denmark people are rich.

To say that we have an equilibrium everywhere is like saying that at the end we all die. That's true and from a philosophical point an interesting issue. However for practical purposes we want to know why some people live longer than others.

Léon Walras is the prototype for all the nonsense of economics. His pure economics is pure idiocy. We find this pure economics in any book about microeconomics, because the only issue they addresse are equilibriums. Equilibrium by definition is a state where nothing changes or where at least a stable mechanism guarantees that the equilibrium will always be reached again. The problem is that all the interesting, dynamic, unpredictible things don't happen in the equilibrium. It is obvious that equilibriums can be modelled mathematically, because the complexity of reality is drastically reduced, but we don't get any useful insights from this kind of modeling.

Academic economists will put the argument forward that these primitive modells are only the beginning and that at the end they will get relevant results using this method. The problem is, that we are waiting for that since 150 years and beside that, there is more fundamental problem. The strength of the market economy is that it can deal best with insecurity. Socialist countries, like the no vanished East-Germany, tried to substitute the search process of market economies by trial and error by central planning based on mathematical modells. The result was a desaster.

The way of thinking of Léon Walras is very similar to the one of Karl Marx. Resources allocates themselves alone. Not capitalist allocate resources, but the capital does allocate itself alone. Labour is in both theories kind of an energy that exists indepedently from human decisions. Both assume that labour is a homogeneous factor, in the theory of Karl Marx complicated work is nothing else than multiplied simple work. The truth is, that qualification depends on decisions of human beings and it in modern economies qualification is has a greater impact than capital, because capital is actually money and money can be printed, see interest rates.

The problem of Léon Walras is the same as the one his colleagues of today are struggling with. Mathematical modeling, in his case algebra, is only possible if the causal relationships are stable. Léon Walras doesn't look for the right method to analyse a problem, but a problem where his method can be used.

If medecine would study only the issues that can be mathematically modelled or artificial organes, reducing in an arbitrary way the complexity, there would be no advance in medicine.

He assumes that the method used is guarantor for the correctness of a theory. If we analysis his texts we can indeed say that he has serious problems in producing meaningfull texts, but we doubt that he resolved his problems by mathematical equations. He assumes that any theory presented in a natural language is less precise than a theory presented with mathematical equations. This is actually mad, if we take into account that a lot theories that changed the world where presented without any equation.

Quant au langage, pourquoi s'obstiner à exprimer très péni- blement et très incorrectement, comme l'a fait souvent Ricardo, comme le fait à chaque instant M. John Stuart Mill dans ses Principes d'Economie politique, en se servant de la langue usuelle, des choses qui, dans la langue des mathématiques, peuvent s'énoncer en bien moins de mots, d'une façon bien plus exacte et bien plus claire ? Concerning the language to be used, why insist in expressing a idea in an unprecise and incorrect way, as David Ricardo or John Stuart Mill did in his Principles of Political Economy, by using the common language, if it can be expressed with less words and in a more precise and clear way by the mathematical language.

Léon Walras, Elements d' economie politique pure ou theorie de la richesse, 6° LEÇON, Du fait de la valeur d'échange et delà théorie de la richesse

Concerning natural languages the case is simple. If they are precise or not depends on the person who is speaking and the person who is listening to him. Some people are indeed not able to express themselves clearly in a natural language, but the case of Léon Walras shows us, that very often people who are not able in expressing themselves in a natural language, are not able to express themselves in the "mathematical language" either. The problem is not the "language", the problem is that one must understand at least onself what one is talking about.

However the terms we used, whatever the method, must be clear. If we use for instance capital and money as synomyms, as it happens very often in economics, it doesn't make any difference if we use the "langue usuelle" or the "langue des mathématiques", the result is nonsense in both cases.

Beside that we should distinguish between the "language" a theory is figured out and the "language" a theory is described. Describing a theory is the trivial part and the problem is, that we don't think nor in the "langue usuelle" nor in the "langue des mathématiques". We think in kind of "associative spaces", because otherwise there would have been no thinking before the appearance of languages, what is obviously not true. (And deaf-and-dumb people wouldn't be able to think, what is not true either.) If there is therefore an error in thinking, it is something that happens before a theory is described in a "language".

What we can actually say it that sometimes we can test the strange results of our brains. This is for instance the case if we write a computer programn. The computer programm does exactly what we want it to do, but very often that is not what we expected. That's the big advantage of computer science and one reason for its success. It is quite easy to test a theory against reality.

If the "langue des mathématiques" is used to PREDICT an unknown variable by known variable and if the unknown variable is a quantitative value, only math is possible, but this is another story. Léon Walras assumes that the "langues des mathématique" is used do DESCRIBE a theory and there is no empirical proof that the "langue usuelle" is less suited for that than the "langues des mathématique".

It is true that natural languages are better suited to express nothing else than vague associations, Léon Walras is a good example for that. However at a certain level of education people are able to reflect about the terms they use and to cuestion them. It seems, if we take economics as an example, people are better trained to cuestion the terms used in a natural language than to cuestion the assumptions of a mathematical modell.

Obviously there would be no need to discuss about the vagues associations of Léon Walras, if they were not typical for economists. We can read statements like that everywhere. We find thousand of discussions of this kind if we but use of mathematics in economics in google. The interesting point is that only in economics we have this discussion, although there are a lot of sciences with a similar structure, for instance medecine. In medecine, or molecular biology, we have hundreds of variables which have an impact on the problem studied and it is impossible to separate them, we have no clear causal relationship, because single changes can trigger a lot of effects, sometimes quantitative methods can be used and sometime we have qualitative descriptions. But nobody never discusses about the methodological approach. Everybody uses intuitively the method best suited for a certain goal. Only in economics there is broad discussion about that issue.

Perhaps that can be explained in part by the fact that economics is always in the center of public debate with very different interests. The question whether the grammar of a natural language is something inherited, as Noam Chomsky assumes, or something completely learned from scratch, will never trigger social unrest or a revolution. Economic concepts, even if they are only an ideological superstructure needed to stay in power, have the potential to destroy the earth. In order to become state doctrin, an ideology has to be more than just an opinion. It must be founded on "scientifical" proofs and mathematical or graphical modeling looks more scientific at least it is more difficult to understand and even if people don't understand the theory, they tend to believe that it is true. The logic is: "If you can't convince them, try to confuse them." Mathematical modeling has in this case the same function as Latin in the middle ages.

It is actually easy to proove that economics has a special relationship to economic modeling. 1) In no other science the method to be used is a problem, people use just any method. Only academic economists, for whatever reason, have a special interest to proove that this method is the best method. 2) It can be prooved easily that the method works like a filter. Very important authors, for instance Joseph Schumpeter, are silently ignored in academic teaching, because they didn't make any use of mathematical thinking. From other authors, like Alfred Marshall, only the concepts that were presented in the original work with mathematical modeling were canonised. 3) Theories which were presented in the orginal work in plain words, the most prominant example for that is The General Theory of Employement, Interest and Money have been reduce to a mathematical modell, the famous IS-LM model, although this modell is logically incoherent and refuted by Keynes himself.

Academic economists put forward the argument that the use of math in economics leads to an advance in economic thinking. The problem is, that there is no evidence for that.

If we take the example of Léon Walras, we can see no advance at all. The general equilibrium is described in a convincing, easy and straigthforward way already explained by Adam Smith, see natural price / market price. That's what Léon Walras wanted to show, but in order to illustrate the idea by mathematical modeling, he commited a lot of errors.

The sentence "Quant au langage, pourquoi s'obstiner à exprimer très péni- blement et très incorrectement, comme l'a fait souvent Ricardo..." is a little bit strange, because David Ricardo is actually the beginning of modeling. The issues addressed are very limited, the assumptions very restrictive. Such a simple modell can be formulated with mathematical equations. However that wouldn't resolve the basic problem. Mathematically modeled or not, the basic assumptions are wrong, see David Ricardo. It is as hard to see what would change if David Ricardo had use the "langue des mathématiques" as it is hard to see that the theory of Léon Walras has improved by using the "langue des mathématiques".

Beyond the obvious error that he assumes a fix amount in the offer of productive factors, but a fix price in the supply of goods there is another one. He started with explaining us that some science deal with "faits humanitaires", human behaviour, and others with "faits naturelles", natural forces which are blind and fatal. As already explained, see above, that's not really the point. He argues that human beings have free will and therefore theire behaviour is unpredictable. That is true, however given the incentives, we can have a tendency to a certain behaviour, see homo oeconomicus.

But the main problem is something else. In his theory there are no "faits humanitaires". There are not even human beings. He contradicts itself, because later on he assumes that economics is something like "hydraulique" and there we have no faits humanitaires. It is true, that in hydraulics we can use mathematic modelling, but his error is to assume that economics is something like hydraulics.

In his model the market player are as inconscious as stone in free fall and therefore the "faits humanitaires" are completly irrelevant. His approach is very similar the approach of Karl Marx and the results similarly absurd.

He assumes that the relationship price / amount is as stable as the force of gravity. If this were the case, we would still live in misery. We would be obliged to pay for our potatoes as much as 300 year ago. His "langue de mathématiques" leads to eternal misery and therefore we prefere the "langue littéraire".

Time is a scarce resource. If something can be said in ten minutes, it should be said in ten minutes. The general equilibrium is perfectly described by Adam Smith, see natural price / market price. Some more insights can be obtained by analysing a partial equilibrium, see Alfred Marshall, equilibrium in the long run and equilibrium in the short run. In total four hours is enough. There is no need to spend half of a semester with these issues. The time saved can be used to learn a programming language, to learn russian, chinese, japanese or whatever, specialing in accounting or whatsoever. We never reach the general equilibrium by wasting time.

The problem is that we have two parties. At one side the students, with a very reduced time budget, and at the other side the academic teachers, with an unlimited time budget. The first group is interested in learning relevant things, for the second group almost everything is relevant, because they get their money anyway. See education for more information about how to resolve this problem.

There are problems on this earth where the understanding of a problem is of no help. If the solution of a problem doesn't benefit the people who should resolve it, they will not resolve it.

The statement that art "advises, commands and controls", while science "observes, describes and explains" is nonsense. By art he understand what we call today applied science, in other words any kind of research activities that is nearer to the market, in other words whose aim are innovations and marketable products. The aim of basic research is not to produce marketable products, but to get fundamental insights.

This difference doesn't exist so clearly in reality. Reseach on stem cells was at the beginning pure basic research, but today it has become one the most promising branches of science in terms of profitability. If it is possible in the future to create organs from stem cells the live of millions and millions of people will change and this will have an impact on society as resounding as the internet technologies. The treatment of cancer will become cheaper, people will live longer, what is going to have an impact on the demographic structure, there will be a restructuring of the labour market etc. etc..

Basis research that never leads to concrete results can't be financed in the long run, otherwise the nations which invest money in basic research should eternally lose money. Why should they do that? Basic research is subsidised not because it is useless, but because the government is the only one who can finance it, beeing him the only one who benefits from all secondary effects. If basic research leads to an innovation and the scientist found a company, the government will benefit. Because he pays taxes, employs people, triggers spill over effects. It is possible as well that the project doesn't reach its scientific aims and is a complete failure, but new methods of analysis where discovered that are useful for other projects. Something that happens very often in molecular biology.

A private company will never invest in that kind of research. The only sure effect of this kind of research is that the scientist learns something, but the more qualified he is, the bigger the chance he goes away. No company will invest in the training of their employees if they get now benefit. For the government that doesn't matter. Wherever he goes, it will benefit. (At least if he or she stays in the country.) A private company can only invest in research if the result is something concrete, for instance a patent on a drug.

We don't say that this criteria is strong enough to allow the steering of public financing of basic research, but it clear that the concept of Léon Walras is wrong. For more details on the topic see research and development.

return to the top of the page ...


ES        DE

la science pure

Léon Walras mixes in a curious way the different character of the different branches of science with the methodological approach to be uses, although there is no relationship.

Despite of what he says at the beginning, he considers economics as a natural science and assumes therefore that the ideal methodological approach is mathematical modelling. (Although this method is actually only used in physics.

Following Léon Walras mathematical modelling is the main characteristic of pure science, albeit he doesn't really define what he understands by exact and albeit he doesn't reflects the cuestion whether the methodological approach depends on the object of study.

infos24 GmbH