<b>Letters</b>: Use with caution

A V Rajwade’s column, “Mathematical models in economics” (March 9) was interesting. All mathematical models, particularly those in social sciences, are contingency models — they operate under certain conditions and assumptions. The more the assumptions, in numbers or impact, the greater the possibility of deriving questionable conclusions. Such limitations should always be kept in mind while using them.
 
There are more limitations. Economics is being influenced by political decisions so much that the dictum “the technical core of economics is indispensable infrastructure for the political economy” looks dated. The government’s demonetisation decision can hardly be repudiated or substantiated by mathematical economics — it was a daredevil decision based on instinct. No model could have envisaged that the 2008 subprime crisis in the US would be precipitated by the greed of a few individuals.

 
Besides, the availability of computer technology-directed tools of data sourcing and analysis have made it easy to infer that this is a “data-laden science” amenable to rational interpretation. But it has worked only to draw opposite forecasts from the same data.
 
All this does not detract from the importance of mathematics-based models in economics, it points to their cautious and rational usage. Y G Chouksey Pune