To win the Nobel Prize in Economics, it helps to wield math. Lots of it

October 15, 2012
October 15, 2012

The Nobel Prize in Economics is out. The winners—Alvin Roth of Harvard and Lloyd Shapley of UCLA—are joining the ranks of some serious math nerds in a field increasingly flush with equations. Shapley, in fact, holds a PhD in mathematics rather than economics.

Economists once eschewed mathematics as too abstract, but these days, an average published paper in the field includes more than 50 equations (like GDP = C + I + G + X – M) and about 2 pieces of data analysis, according to a recent study. You can see the trend in the chart above.

Nobel laureates in the dismal science are even more inclined toward math than the economist population at large, the study also found. Recent winners of the prize include Eric Maskin (2007), who earned both his bachelors and PhD in mathematics, and Peter Diamond (2010), a college math major.

Why? The researchers suggest the Royal Swedish Academy of Sciences, which awards the Nobel, favors economists who do broad-reaching theoretical work that is best communicated in equations, not in prose. As Paul Krugman, who won the prize in 2008, wrote in an essay advocating the use of math by economists:

…it is important for your colleagues (and students) to understand how you arrived at your conclusions, partly so that they can look for weak points, partly so that they may find other uses for the technical tricks you used to think an issue through.

Whatever the reason behind Stockholm’s current love for equations, the language of math hasn’t always been popular parlance among economists. Many in the early 20th-century outright shunned it. In 1906, the neoclassical economist Alfred Marshall, instructed his comrades to:

  1. Use mathematics as a shorthand language, rather than an engine of inquiry.
  2. Keep to them till you have done.
  3. Translate into English.
  4. Then illustrate by examples that are important in real life.
  5. Burn the mathematics.
  6. If you can’t succeed in (4), burn (3).

But since Marshall’s time, math has taken over.

Yet the debate about whether or not this is appropriate seems to be active…

…and it certainly was in 1998, when Krugman wrote his defense of math. At the close of that essay, he offers up his own, revised version of Marshall’s rules, which are a bit less…incendiary:

  1. Figure out what you think about an issue, working back and forth among verbal intuition, evidence, and as much math as you need.
  2. Stay with it till you are done.
  3. Publish the intuition, the math, and the evidence—all three—in an economics journal.
  4. But also try to find a way of expressing the idea without the formal apparatus.
  5. If you can, publish that where it can do the world some good.

*Note: if you’re curious about which awards qualified as “top-tier,” check out the original paper.

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