Well, here are my thoughts: it doesn’t really seem to me like the neoclassical school needs mathematics. After all, the founders of neoclassical economics, one of whom was also the founder of the Austrian school, did not use merely as much math as is found today in the “dismal science.”
My question is two part:
Are mathematics really necessary for neoclassical economics?
Are there any neoclassical economists who aren’t that math oriented?
Math is useful for lots of stuff. take some calculus and differential equations and you’ll agree.
Your signature quote is wonderful. Can I steal it?
So you would say that making something unquantifiable, like utility, into an equation serves a useful purpose?
For a critique of mathematical economics, see Mathematics and Economic Analysis by William Anderson.
Yes.
From the article:
There is no way to take a cardinal measure of someone’s satisfaction. I can say that I like chocolate more than vanilla,
but I cannot put that preference in cardinal numbers. An attempt to do so is nothing short of an exercise in fraud.
I can quantify my preference by saying that I would like a chocolate cone as much as 3 vanilla cones, can’t I?
I won’t steal your quote here, just elsewhere.
Prove it.
No, you can’t. Not in a sense that is meaningful to economists. They’d ask 3 times what?
Why Utils of course… silly silly Austrians [8-)]
If I gave you 3 vanilla cones in exchange for 1 chocolate cone, would that be enough?
Nope.
Actually that would only show that, on an ordinal scale, chocolate would give you more utility than 3 vanilla cones. I’m not sure why Austrians claim that neoclassical theory requires cardinal utility scales? According to most mainstream textbooks they explicitly define their scales as ordinal.
How would an indifference curve work with ordinal utility?
Saying you like a chocolate cone as much as three vanilla cones is not the same as using calculus in economics, it simply is ordering things on your value scale. You can’t say that one chocolate cone gives you exactly 33 utils, and one vanilla cone gives you exactly 16.547 utils, but the diminishing returns from each additional vanilla cone means that three vanilla cones give you only 33 utils, which is equal to one chocolate cone. Obviously, saying anything like that is absurd.
If you really need an explanation, here are two things:
Not all cones are identical.
Do you really think you can measure utility? Furthermore, do you really think you can measure the diminishing returns, and thereby calculate exactly how many vanilla cones you need to be more satisfied than having x number of chocolate cones?
Anyways, so now that we’ve come to realize the ridiculousness of using complex mathematics in economics, can someone please answer my questions? Thanks.
Can you point me to a mainstream neoclassical textbook that uses cardinal versus ordinal utility? I am not claiming that you are wrong, I just need proof. The textbooks I have do not endorse cardinal scales.
Do they have indifference curves?
Have you ever taken an intermediate micro or macro class? Do you have any intermediate micro or macro text books?
I can’t give you concrete evidence because my scanner isn’t working ATM, but a book that does use mathematics in the way I just described would be Microeconomic Theory: Basic Principles and Extensions by Walter Nicholson.
Yes. The textbook that I am most familiar with is Intermediate Microeconomics by Hal Varian and it states explicitly that utils cannot be measured and therefore cardinal utility fails. It also says that cardinal utility is unnecessary because you can define preference functions in such a way so that if any value is higher than another value than it has more utility on an ordinal scale, not that one bundle of goods has 1.5 (for instance) times more utility. Are you saying that they don’t even claim to use ordinal scales or that they say they do but really do not?
You’re just being intellectually dishonest now, does it have indifference analysis?
You didn’t even check before calling me intellectually dishonest. You owe me an apology because it was you who were intellectually dishonest.
“The only property of a utility assignment that is important is how it orders the bundles of goods. The magnitude of the utility function is only important insofar as it ranks the different consumption bundles; the size of the utilty difference between any two consumption bundles doesn’t matter. Because of this emphasis on ordering bundles of goods, this kind of utility is referred to as ordinal utility.”
“Since cardinal utility isn’t needed to describe choice behavior and there is no compelling way to assign cardinal utilities anyway, we will stick with a purely ordinal utility framework.”
Varian, Hal. Intermediate Microeconomics. New York: W.W. Norton & Co, 2006.
I’m waiting…
You’re quite right, I apologise, that term gets thrown around all too easily on these forums though. In any case I should have checked.
An indifference curve constructed with ordinal utility doesn’t make any sense, how can an individual rank a potentially infinite number of “bundles” at the same utility? Moreover it makes no sense to then put a different curve further out, thus indicating greater utility because there’s no meaning in the fact that it’s further out because there’s no units as to how much further out its by and no way to compare it between people.
Once again, I’m sorry for the hostility.