<p>I’m an undergrad majoring in economics and business, in my first year at university, and although I really like mathematics, I somehow can’t understand how all these mathematical models can be true and useful in practical life.</p>
<p>When I chose to study economics I was initially expecting mainly philosophical stuff, historical, social, human… practical things… </p>
<p>All these mathematical ideas seem too abstract to me.
How can you apply maths to human behavior?</p>
<p>What I’m trying to understand is: is all this math and all these numerous models really useful in econ and biz?</p>
<p>Do people who get a job after learning economics or business really work with Lagrange, budget constraints and cumulative distribution functions?!
Or is this all just theory?</p>
<p>I suspect that unless you get a PhD in Econ or work Engineering/Math you’d likely not see Lagrange in your workplace.</p>
<p>Depends on your program as well. Some universities gear their econ programs more towards policy (closer to what you expected) while others gear theirs towards the theory aspect, which generally leads to PhD programs.</p>
<p>The idea of using mathematics is that it is extremely useful in describing change or for maximizing or minimizing objectives given some constraints. Fundamentally, economics tries to find a way to best allocate scare resources throughout society in a manner that maximizes its benefits. Using calculus (differentiation, lagrange etc.) it is easy to do these things. Maximizing utility etc.
However, I feel there is a huge difference between a mathematician and an economist who uses higher level mathematics. To me, a mathematician uses equations and models to describe the world which is already there. Economists and others try to describe how the world should act and be. But thats just my opinion and each have their own merits.</p>
<p>Thanks.</p>
<p>Yeah, that’s what we’re currently doing. Optimization, portfolio management, inventory management, etc.</p>
<p>What I’m asking is simply whether people in finance actually work all day doing these mathematical applications?
(I personally don’t know anyone working in finance, and all I know is from TV and literature… never seen that financial analysts or economists use all these things in their daily work)</p>
<p>It depends what you are doing but for the most part no. Ibankers will generally not apply these applications. If you are a trader it depends. Some traders are “quants” who rely on the technicals and you may come across an exotic pricing model that uses advanced mathematical techniques. However, you will probably have a calculator that can do all the calculating for you. For the most part, you wont need that much math (unless you are a quant). However, the thing about mathematics is that it forces you to think analytically which is essential in the world of finance.</p>