I know that the Austrian School is opposed to mathematics in social sciences but what about math to describe financial processes and risks, in particular insurances? The latter, highly embraced in anarchist essays, is merely impossible without some econometrics and tons of higher math. Is the opposition to math just in the field of economic policy and “theoretical” economic science?
He’s not an Austrian, but Nassim Nicholas Taleb’s views on probability theory and risk can be described as consistent with the Austrian views. Might want to look him up.
Finance people can use all the complicated math they want…provided they are playing with their own money.
The epistemological faults AE finds with mathematical/statistically oriented economics applies just as easily to much of what today passes for statistical finance IMO. I see a LOT of kinship between the big guns of AE and say, Nassim Taleb’s all-out assault on quantitative finance in Fooled By Randomness and The Black Swan both books that IMO should be read by every Austrian enthusiast.
The problem is not the use or non-use of these methods by traders - if they blow up often enough and have to face those consequences, they will eventually learn to distrust the models. The real problem is that oftentimes these employment of these methods has become mandatory by federal agencies - Value At Risk is one of those. The “regulators” rubber-stamped AAA ratings to mortage backed securites for instance in part because they crunched the numbers according to the (completely inane) formulas and the answer was “safe”. And then when they fail, it’s Bailout Nation…
P.S the insurance business, contrary to popular opinion, should not need incredibly complicated math. There is a diminishing returns to scale effect in terms of complexity of risk modelling when it comes to insurance. In any case, the market will, if given a chance, sort the successful methods from the unsuccessful ones.