Jan 4, 2010

Combining math with Economics

There are so many “pseudo” sciences in economics (especially in macro economics) that are just absurd and have almost become part of the political tools for certain type of opinion holders. The true science should be based on Math and should be provable and verifiable.
Economics is the analysis of resource allocation among economics agents. The current structure is problematic because it did not start from the basic foundations as the other sciences. Physics starts with basic physical objects, which are mass/energy, time, distance, motion, etc. Chemistry starts from chemical objects, which is element, molecule, chemical compounds, etc. Biology has a foundation starting from cells, to tissue, to organ, to systems, to species, to ecosystems. Psychology has a foundation from neuron, neuron network, myelin, behavior, trait, etc. Such meaningful abstraction is critical in establishing the structure, theorem, taxonomy (The conceptual parts, i.e., how do we describe that science.) and the observing, modeling, experimenting, theorizing and verifying the concepts (The methodology part). Physics has the laws, chemistry has the periodic tables, biology has the evolution theory and genetic theory (DNA mechanism) all because the foundation of each of these sciences are based on consistent, verifiable and conceptually complete basic objects.
The economics/social science should also be based on such conceptually simple basic objects and they are: A) economic agents are merely organisms including individual human and human organizations that are connected through the forces of communal, authoritative, and exchange relationships. B) Resources are all the objects (both physical and mental) that affect the state and stochastic process of those economic agents. The effect of resource on economic agent is its utility. Such foundation will make economics more comparable to other sciences and thus give it more powerful tools and more meaningful methodologies in its study. For example, complex mathematics, game theory, probability analysis, chaos theories, topology, signal theory, operation research, organizational mathematics, and computer science theorem can all serve as meaningful aids to the study of economics if the foundation is solid. This process should be analogous to how calculus is helping physics, or how statistics and stochastic process is helping chemistry now.

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