Friday, March 27, 2009

On Math and Models

Below is my comment on a Cafe Hayek post:
The problem isn't with math - it's the models you use to exercise that math *with*. It's an inability on the part of people who misuse this stuff to now know what they don't know, they let themselves get lost in the comforts of some formula unaware of what it represents. Any model makes simplifications, the modeler must know what tradeoffs s/he made while using the formula in question.

Hayekian world view is mostly about "simulation" - or rather, is best represented through simulation, which is another form of math. Micro actions adding up to a global set of choices is what mathematics can easily represent.

The world is nonlinear, therefore the models have to reflect this. People incorrectly say "math is bad". No dimwit - what is bad is YOUR MODEL, not the math. People try to use linear models to represent nonlinear forces. Being honest about this fact will make our models to be more realistic and they will tell us what we do not know in clearer terms. Even though most nonlinear models are unsolvable, there are things you can infer from them, and that makes them an invaluable tool to evaluate an unknown, uncertain future.

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