Pareto and Walras were the first to use mathematics in economics and finance at the end of the nineteenth century. They created classical models of the free markets and explained these mathematically. After these models were created, other famous economists came up with mathematical economical ideas, such as Schumpeter and Keynes. Mathematics was used to simplify and clarify various complicated theories. This use resulted in both advantages and disadvantages. This essay will evaluate the uncritical use of mathematics in economics and finance on multiple aspects.
Firstly, if one uses mathematics in economics and finance uncritically, one needs to know all the numerical values and other variables to actually explain and predict certain events and its mutual interdependencies. This knowledge is never entirely available, because the values depend on too many particular circumstances. What’s more, the succession of events in the history of the economics does not show any internal coherence, which makes predicting harder. Moreover, there is no controlled experiment in the economic research field and no falsifiable hypotheses are made (Von Hayek, 1989). Furthermore, different economic models have different implications, thus are applicable to according situations. Hence, not one mathematical model could be implemented (Rodrik, 2015). In addition, human beings and their behaviour should be included in the theories of economics. This may improve predictions (Tavris, 2015).
Secondly, mathematics in economics and finance does not help to form the paradigm to understand society’s current issues and events. For example, the classical economist explained the comprehensive picture of sociology, history and economics; it is not just a growth model (Heilbroner, 1979). Furthermore, regular prices never actually follow linear
