March of the Models by Niall Kishtainy

Economists turned classical word-based political economy into a mathematical discipline Today’s economists rarely consult Adam Smith’s 1776 The Wealth of Nations, however celebrated it is for revealing the workings of the market. Contemporary practitioners are often more at home with concise journal articles full of crisp equations than with Smith’s substantial tome, a sweeping work of historical and social as well as economic analysis that takes more than a few afternoons to wade through. Smith is often considered the father of modern economics—and in the late 20th century his legacy was claimed by advocates of free markets and limited government—but contemporary economists’ modeling and mathematics toolbox has little in common with Smith’s literary, humanistic methods. Later economists often claimed proof for Smith’s famous notion of the “invisible hand” in their highly abstract “general equilibrium” theory, with its explanation of the conditions needed for a socially efficient market economy. It was Smith’s hazy metaphor pinned down by cutting-edge math, which to be usable was applied to a model of the economy so simplified that Smith would hardly have recognized it.