So I’ve been thinking. The more complex an economic system becomes, the more we have to deal with the numerical information that exists within its framework.
So for example, in the global community, the increasing integration of companies (notable trans-national companies/firms) results in a larger volume of data for each specific company. Dealing with and interpreting this data requires a greater level of mathematical skill. In my (extremely basic and meritless) argument, the analysts playing field has become increasingly mathematized.
So who will be able to deal with this complex information? Well, those with the necessary mathematical skills.
But is this a realistic trend in the economy as a whole? Note that the above is not the sole reasoning for the argument. There are possibly a whole lot of other factors to consider other than corporate finance. For example; real estate, the stock market, local businesses, marketing etc.
Does the STUDY of these areas (NOT financial SUCCESS in these areas - which involves other things) become more mathematized as complexity increases?
As a cheap reference, are recent economic Nobel Lauretes more likely to have a mathematical background than before? Or has this always been the case?
I do not have a strong postion one way or the other on the matter. I merely write the above as material for debate.
Also, I realize that some may have a problem with saying that the complexity of an economy increases with respect to time, with definitions bearing on the matter.
I am not an expert on this topic, but I believe that, to answer your last question, yes, recent Nobel Prize winners in Economics are far more likely to be doing mathematical analysis than, say, winners from many decades past. This has been a general trend in economics going back to, I would guess, the 50’s and 60’s. It has become far more quantitatively oriented. I have not done any kind of comprehensive survey, but I understand that this is a trend in the profession in general. To wit: articles written in the 60’s have very few equations. Many articles written today have equations all over the place, either because they are focused on game theory, or econometrics or some other quantitative discipline.
For what it is worth I do not think that this relates to the increasing complexity of the world economy. I think this is a trend in a maturing scientific discipline. I mean, you could say the same thing (after a fashion) about Physics. Early physics (i.e. Aristotle) had no equations at all. Now it’s nothing but equations.
Now, there is at least one exception to my statement that this increase in quantitative analysis is independent from the increase in complexity of the economic system. The traders on Wall Street (and London, and Tokyo) have, as I understand it, jumped into quantitative analysis in the last 20 years, and I think this is very much a response to the increase in complexity of the system. But what is interesting there is that the increase in complexity may perhaps have been driven by the push towards quantitative analysis. But, I would not necessarily describe these guys as economists. I don’t think they are studying the economy from a scientific, academic perspective. What they are trying to do is make money.
Yeah, that’s what I thought. It’s interesting to look at some of the contrasts between past Nobel Economic Lauretes (pre-1940’s), and those in more recent times.
I realize what you are saying, but there is a difference between the two fields of study. The field of economics is dynamic, where there IS room for the systems to evolve and new models to take the place of older models.
The principles in physics, however, are not. Even if systems change we do not have to replace them with totally new models, simply modified ones. Where a re-hashing of an old physics model is total (say Newtonian for Relativity), it is primarily because the old model was insufficient to cope with the quirks of new experimental evidence - not because the system itself has changed.
I’m not sure how this bears on your question, but it seems to be worth mentioning that John Nash, a mathemetician, received his Nobel prize for economics. The award was relatively recent, but it was for work done long ago. Since there is no prize for mathematics, the only way a mathemetician can attain a prize is by application of mathematics to one of the fields for which awards are given.
My daughter just got a degree in economics from the University of Chicago, and she sure things so, having to suffer through an excessive number of math courses. But the hot new field of behavioral economics has a lot less math and modeling - in fact some of the leading stars in the field seem to pride themselves on not knowing as much math as the modeling school. (No cite, personal communication.)