Louisville Process Theology Network

What are the limitations of statistical analysis and other
mathematical techniques?

Historians say one the most significant strengths of
historical analysis is that it takes into account the characteristics, such as
leadership, psychology, emotions, personal ties, compulsions and ambition.
Numbers cannot relate to these factors.

Mathematics is still considered by many to the language of
the natural sciences. This concept goes back at least as far as Galileo. Some
believe everything we know and perceive will eventually succumb to quantitative
measurement. Others believe there is a real qualitative aesthetic dimension of
our lives that will always resist such measurement. You can find Nobel Prize
laureate scientists on both of sides on this issue.

Some economists seem of have an inferiority complex about
their discipline. In their zeal to make their field into a “hard science” like
Physics and Chemistry, they are working overtime to develop mathematical models
for seemingly every economic activity. It appears that research grants in
economics support nothing else.

Some historians and other “soft scientists” suspect the
economists have become obsessed with the internal consistency of their
mathematical models; an obsession that is isolating them from the broader
context of their research. It’s not very hard, they say, to find published
articles on the same economic issue based on conflicting premises.

Historians believe their purpose is to find the external
consistency. “A good historical narrative must connect the dots of all relevant
historical events with casual links.”

For example, Charles Kindleberger’s historical narrative of
economic cycles, “Manias, Panics, and Crashes” has become the gold standard on
that subject. Meanwhile, data-driven theories on the nature of booms and busts
are not working out.

Economists would probably counter that historians are
obsessed with their favorite narratives. To which, the historians would likely
point out that hard data is not nearly so neutral is it may seem. There are
methodological biases, too.

Whatever the biases, it’s clear the economists cannot reduce
economic behavior to the numbers alone.

See “Economics, History, and Causation” by Randall Morck, in
the “Business History Review,”

Spring, 2011.