The Market, the Firm, and the Economics Profession

The mathematical and statistical complexity of economic research increased remarkably over the past century. While criticisms of the trend abound, the "wisdom of crowds" argument creates a presumption that the profession's acceptance of increasing mathematical sophistication is a net improvement. I provide a contrasting "market failure" argument for the excessive mathematization of economics. Academic research is not a cash-based economy, and this limits economists' ability to contract for assistance with technical research. Consequently, production of mathematical and statistical research must use the firm—the department—instead of the market. This alters the composition of the faculty and ultimately the economics curriculum, and the resulting level of sophistication may be greater than optimal.