Understanding the Role of Mathematics in Economics

Understanding the core components that make up an industry can help you make a more informed decision about whether to pursue a potential career. When considering a career as an economist, it can be beneficial to examine the elements of the field, such as the role of mathematics in economics. Strong mathematical skills can be beneficial to an aspiring economist, as there are segments of the industry devoted to using math to improve performance.

In this article, we discuss what the role of mathematics in economics is, show why math is important for economics, list the types of math economists use and explain uses for math in economics.

What is the role of mathematics in economics?

Although mathematics has a role in all types of economics, it's most common in mathematical economics, where it's a core component. In mathematical economics, economists apply mathematical principles to economic theory. An economist may use mathematics alongside other methods and tools and techniques, such as data harvesting and computer algorithms.

Related: What Is an Economist and What Do They Do?

Why is math important in economics?

Mathematics in economics allows an economist to offer more precision with their projections and analysis. This may allow them to extract increased guidance from the results of their analysis. Using hard data and mathematical calculations can also reduce the potential for bias and economic projections.

The importance of mathematics in economics has increased with the growing presence of computing in the field. Computer technology allows economists to process large amounts of data or more complex mathematical equations more easily. This expands the capability of mathematics in economics and may make it a more appealing field to pursue when working as an economist, as computers can make complex calculations easier to complete.

Related: 18 Top Economics Degree Jobs

Types of math in economics

When applying mathematics as an economist, you may make use of many types of mathematics. The most common forms of mathematics in economics are:

Algebra

Algebra is a basic math field, and it serves as a foundation for many other forms of mathematical calculation. Algebra allows an individual to solve equations with one or more variables, finding the result for a variable under defined conditions.

For an economist, algebra is a useful mathematical skill for calculation and projection. Working with variables allows an economist to perform a task such as setting a target growth rate and solving for the required related variables to reach that rate using an established equation.

Related: Algebraic Mathematical Equations: Definitions, Types and Examples

Calculus

Calculus is a mathematical field dealing with rate-of-change calculations. Basic calculus courses are a common component in many high school curricula. Students may also pursue advanced study during their undergraduate education when interested in working in a mathematical field.

Calculus can be a powerful tool for an economist when assessing economic performance and making projections. Using calculus to generate curves based on economic information allows you to identify trends and make more informed decisions. As an economist, you may apply this to projects such as market assessment, supply and demand analysis and economic forecasting.

Probability

The mathematical field of probability measures the likelihood of a specific occurrence or outcome. Probabilistic assessment allows a mathematician to identify whether a potential outcome is likely to occur and to compare the relative likelihood of two or more potential outcomes.

As an economist, understanding probability can be useful when making estimations of likely outcomes to economic decisions. By combining the probability of different potential outcomes multiplied by the estimated cost or benefit of each outcome, you can perform an assessment of the expected cost or benefit of an economic plan.

Statistics

Statistics is a mathematical study that focuses on the collection, sorting and analysis of sets of data. It allows a mathematician to assess a population represented within the data. That is a critical skill for tasks such as modeling and projecting for behaviors or responses within a community.

Statistics is a valuable mathematical skill for an economist because it allows you to work with large amounts of data. Applying statistical calculations to datasets may allow you to identify key trends or information on grouping within a community. You may then use this information to guide yourself or others in decision-making positions when making suggestions for plans or policies.

Uses for mathematics in economics

If you're working in economics, you may use math for a variety of professional purposes. Some of the most common uses for mathematics in economics include:

Analysis

Analysis is a key responsibility for an economics professional. Economic work often includes assessing information about economic performance, markets and other key economic data and extrapolating relevant information from the data. This allows individuals making economic decisions to do so while using information from various sources.

Math plays a large part in many forms of data analysis. This can include both the simple mathematics to perform tasks such as finding averages to advanced mathematics in the form of differential equations. Strong math skills in a diverse range of math capabilities can help an economist complete their analytical work more effectively.

Related: Understanding Economics: Indicators, Types and Why Economists Are Important

Modeling

An economic model provides a visualization of key economic data. Using a model can make it easier for individuals to conceptualize or understand the state of an economic market. A model may also provide a new form for data that offers insights that the raw dataset does not.

As an economist, you are likely to use your math skills throughout the process of creating an economic model. Accurate math provides reliable data you can use in constructing a model, which can increase the value of the model provides upon completion.

Projection

Economic projections provide predictions of future economic behavior and patterns. Accurate projections are a valuable tool for economists, as it allows them to make decisions for future planning based on the state and behavior of the market in the future.

Math is an integral part of creating economic projections. It allows an economist to perform calculations on economic data, often using the principles of calculus to assess potential changes in the data over time. Developing your mathematical skills as an economist can help improve the accuracy of your calculations both by ensuring you complete them correctly and expanding the number of calculations and math principles you understand and may apply to your work.