Meta-Mathematics and Meta-Economics: In Defense of Adam Smith and the Invisible Hand

Nimai Mehta, American Univeristy

Yong Yoon, American University

04/21/2022

Abstract : The recent AU Math/Stat colloquium by Gael Giraud (03/22) has inspired us to consider more critically the application of mathematics to economics. Neoclassical economics when seen as applied mathematics has tended to assume the form of a self-contained, closed system of propositions and proofs. Progress in explaining real world markets and institutions, however, has more often been the result of insights that have emerged from outside which, in turn, have led to a reworking of existing theoretical propositions and models. We highlight here the debt that economics science owes to Adam Smith whose early insights on the nature of exchange, the division of labor, and the “invisible hand” continue to help modern economists push the boundaries of the science. We will illustrate the value of Smith’s ideas to economics by showing how they help overcome some of the game-theoretic dilemmas of multiple- equilibria, instability, and non-cooperative outcomes highlighted by Giraud.