Year: 2024
Type: article
Abstract: The mathematical approach is threatening the progress of economics, as it tends to disregard the complexity of economic behaviour and the unpredictability of human actions. -Friedrich HayekThe reliance on mathematical models in economics has long been debated, with critics arguing that this approach fails to capture the complexity of human behavior and the unpredictability of economic systems.While mathematics provides a structured method for analyzing economic processes, it often simplifies decision-making to a onedimensional utility function, neglecting social, psychological, and political influences.This paper examines the limitations of classical and neoclassical economic theories that heavily depend on mathematical rigor, highlighting the pitfalls of models like the Rational Agent Model, General Equilibrium Theory, and Expected Utility Theory.Drawing on examples such as the 2008 financial crisis and the Terra/Luna cryptocurrency collapse, the paper demonstrates how over-reliance on equations has led to inaccurate predictions and ineffective policy decisions.It calls for a more interdisciplinary approach that integrates insights from psychology and sociology to address the gaps left by traditional mathematical economics.
Source: Management Studies
Author: XIANG Peng
Institution: Nanjing Normal University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4403963777