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The Efficiency and Effectiveness Dilemma: The Economist's Pursuit of Exactitude and Recognition

Updated: Apr 30, 2023

The illusion of mathematical precision in economics: A critical analysis of the efficiency and effectiveness approach in economics.

The study of economics has been heavily influenced by the natural sciences, with economists attempting to apply mathematical methods to analyze society. However, economics lacks the same level of exactitude found in math and science, as it relies on observations rather than experiments. Despite this, economists continue to try to mathematize economics, resulting in a discipline that appears more precise than it actually is. The focus on measurable criteria, such as a company's efficiency, has become the driving force behind the discipline. But is this approach truly effective?

Many economists fail to question this approach, as they prefer to think of economics as a natural science rather than a social or even a humanity subject. Instead, many economists seek recognition and admiration for their work, often presenting it with graphs and mathematical models filled with Latin terminology. This drive for recognition often leads to a narrow focus on their own ideological views, which are then imposed on the real world through mathematical models.

As Wilhelm Röpke pointed out in "Jenseits von Angebot und Nachfrage," economics has shifted from the analysis of the movement of individual prices, wages, and other value measures to a focus on global flow rates. This shift has resulted in a volkswirtschaftlicher Ingenieurkunde (engineering approach to economics), where mathematical equations have become the primary tool used in the discipline. This approach has replaced the traditional reliance on sound judgment, experience, and common sense with the ability to use formal methods that were never intended for social sciences.

Ultimately, economics has become a discipline that prioritizes the recognition of the economist rather than the effectiveness of their approach. It is crucial to recognize the limitations of mathematical models in economics and to focus on a broader, more holistic approach that prioritizes the well-being of people and society as a whole.

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