In order to ensure that this thread continues to meet TL standards and follows the proper guidelines, we will be enforcing the rules in the OP more strictly. Be sure to give them a re-read to refresh your memory! The vast majority of you are contributing in a healthy way, keep it up!
NOTE: When providing a source, explain why you feel it is relevant and what purpose it adds to the discussion if it's not obvious. Also take note that unsubstantiated tweets/posts meant only to rekindle old arguments can result in a mod action.
On April 11 2014 10:45 JonnyBNoHo wrote: [quote] Lol, OK, you don't like how I phrased it?
Grow up.
Rationality isn't a myth, it just doesn't hold true always. There's a difference.
What were you trying to say then?
Just replace rationality with the rational myth you referenced.
To avoid confusion I'll let you define which version of the 'rational myth' you wish to posit as non-mythical. Depending on the wording I might agree with you.
For clarification this is more or less what I was referring to.
"Neoclassical theory operates on a few basic assumptions–mainly that economic decisions are always made rationally based on fully informed evaluations of utility."
Well then... I think I'm confused... That is a myth. "an idea or story that is believed by many people but that is not true".
And your 'clarification' is wholly inapplicable to the statement as worded?
Like I said, I wasn't disagreeing with you so much as moderating your comment a bit. People do act rationally at times and rational assumptions can explain a lot of economic behavior. It's not something that holds true always though, and in that sense it is a myth.
'Rational assumptions' used in such a way, is more explanation through correlation than causation, as they are generally espoused.
Taking the time to formulate your opinion or 'moderating' in the way done here is what I have been requesting. I appreciate when you do it this way as opposed to your initial comment.
I think it is not helpful to perpetuate any unfounded validity in economic thought founded on such a fundamentally flawed assumption of 'always' behaving rationally. Further the proposition that replacing the word 'always' with some variation of 'mostly' solves anything worthwhile is inaccurate. Stretching it to rationalize current real-world economic situations is rarely if ever helpful even in many cases when you could say one of such models ''accurately' correlates to a real-world situation.
That's basically why I say the 'one-liner' distinction isn't really important, particularly when it's vague and the significance of the distinction unclear. Add on top of that you didn't really disagree with any of the actual substance of the claim, and perhaps you can see how your concern for the need of the distinction in the first place is becoming hard to envision as sincere?
But because this is not my first time talking to you I know better. So I thank you again for the more thought out version and I look forward to more of those and less of the one-liners?
Well, I prefer shorter posts and I'm not going to change the way I post because you don't like it, though I won't ignore your criticism either.
I still think your comments here are too critical. It's not really practical to model reality. You need to make assumptions and simplifications to get anywhere and assuming that people are rational has its place. The same can be said for the oft-hated efficient market hypothesis. It's not always an accurate depiction of reality, but you can still get a lot of useful mileage out of those theories and the models that work around them.
Can you give us some examples of successful applications of such theories? Successful predictions?
Off the top of my head, the idea that markets are efficient has contributed to the success of low cost index funds, which have been great for investors (more for them, less for financial managers).
I'd like to try out approval voting in the US. I'd hope it would lead to improved candidate options as it makes it easier for alternate parties/individuals to run. I'm curious if it would lead to an increase in centrist candidates.
If this thread were taken as the basis, economic models and domestic policy is all an argument on semantics.
“If you wish to converse with me, define your terms” -Voltaire
Seems strange for someone in the legal world to highlight with hyperbole that commonplace concept? Especially as if it were a negative thing? (Although if you're making a case for interpretation of meaning instead of the letter of the law/dictionary [or whatever authority you consult for the meaning of words] I'm certainly interested?).
I mean otherwise if we didn't do it, we wouldn't even really be having a discussion?
The funny thing about economists' descriptions of the "marketplace" and financial transactions is that the people who actually do business know that the models are broken. Across campus from the economics department, where people spend their time rationalizing and celebrating the ideology of capitalism, you have the business school, where jonny went, and people actually learn how to run businesses by making profits, and selling people things through advertising. The foundational bedrock of advertisement is that you can convince people to buy your commodities over the commodities of someone else, not by rationally explaining the utility benefits of your commodity compared to theirs, not by providing them perfect information so that they can make a rational decision, but by manipulating how people feel about a certain product. Market values become completely detached from use values, even as they become impossible to predict because they are tied to the subconscious desires of people operating with imperfect information. And this is by design. Advertising ends up manufacturing demand in an inherently irrational way. How can you even talk about rational actors in a marketplace dominated by ephemeral desires that spring into and out of existence in response to social cues mediated through marketing departments?
On April 11 2014 17:15 IgnE wrote: The funny thing about economists' descriptions of the "marketplace" and financial transactions is that the people who actually do business know that the models are broken. Across campus from the economics department, where people spend their time rationalizing and celebrating the ideology of capitalism, you have the business school, where jonny went, and people actually learn how to run businesses by making profits, and selling people things through advertising. The foundational bedrock of advertisement is that you can convince people to buy your commodities over the commodities of someone else, not by rationally explaining the utility benefits of your commodity compared to theirs, not by providing them perfect information so that they can make a rational decision, but by manipulating how people feel about a certain product. Market values become completely detached from use values, even as they become impossible to predict because they are tied to the subconscious desires of people operating with imperfect information. And this is by design. Advertising ends up manufacturing demand in an inherently irrational way. How can you even talk about rational actors in a marketplace dominated by ephemeral desires that spring into and out of existence in response to social cues mediated through marketing departments?
Whats disconcerting is how long this has been pretty well established. I mean look at this Pepsi commercial it just screams 'rational' and 'utility'. Nothing helps 'keep you thin' like Pepsi...
To be fair Coke was doing the same thing.
To think it took until 1990 just to get decent labeling on 'food'...
People are mixing two completly different topic, and this come from a misunderstanding about my first post.
I don't care about economic theory and the idea of incentive and rational agent. It's not a bad, not a glorious theory, but it has its own value. Economic thinking built itself, since a decisive article coming from Milton Friedman (1954, I think the title is positive and normative economy or something like that), that the value of a model was not supposed to be evaluated by the empirical nature of its hypothesis : models are completly irrealist by nature because you need to simplify reality. For Friedman, the core aspect of economic models, and their value, was supposed to be found in their ability to predict the future : the model of the market is absolutly ridiculous if you think about it, and the "law of offer and demand" is obviously wrong (the equilibrium), but it is the only model that actually explain why prices goes up when demand goes up and offer stay the same.
No economist consider that the homo economicus is true "in real life" - but it is a valuable assertion that has value because, through the modelization of the behavior of agent, economists are able to predict, to a certain degree, how things should evolve. Incentive is the same, another theory that has its use - if there is a problem, it is not that economist have irrealist hypothesis, but that they only consider economic agent as rational, and never try to use different type of modelization (there are a lot of other kind of vision on individuals in philosophy and sociology).
But, my point was that trying to get a practical solution to practical matters out of those completly irrealists theories is retarded. What you need is to create a dialogue between various point of view / theories, to really get a grasp on reality. Nobody consider that a country with no state and only the market can function, because the market is not "pure and perfect". It's the same kind of thing that bothers me when someone tell me that incentive is a valid justification to any kind of situation or political program (like we saw many time on inequalities or lately on healthcare).
On April 11 2014 19:36 WhiteDog wrote: People are mixing two completly different topic, and this come from a misunderstanding about my first post.
I don't care about economic theory and the idea of incentive and rational agent. It's not a bad, not a glorious theory, but it has its own value. Economic thinking built itself, since a decisive article coming from Milton Friedman (1954, I think the title is positive and normative economy or something like that), that the value of a model was not supposed to be evaluated by the empirical nature of its hypothesis : models are completly irrealist by nature because you need to simplify reality. For Friedman, the core aspect of economic models, and their value, was supposed to be found in their ability to predict the future : the model of the market is absolutly ridiculous if you think about it, and the "law of offer and demand" is obviously wrong (the equilibrium), but it is the only model that actually explain why prices goes up when demand goes up and offer stay the same.
No economist consider that the homo economicus is true "in real life" - but it is a valuable assertion that has value because, through the modelization of the behavior of agent, economists are able to predict, to a certain degree, how things should evolve. Incentive is the same, another theory that has its use - if there is a problem, it is not that economist have irrealist hypothesis, but that they only consider economic agent as rational, and never try to use different type of modelization (there are a lot of other kind of vision on individuals in philosophy and sociology).
But, my point was that trying to get a practical solution to practical matters out of those completly irrealists theories is retarded. What you need is to create a dialogue between various point of view / theories, to really get a grasp on reality. Nobody consider that a country with no state and only the market can function, because the market is not "pure and perfect". It's the same kind of thing that bothers me when someone tell me that incentive is a valid justification to any kind of situation or political program (like we saw many time on inequalities or lately on healthcare).
Neoclassical economic models are about as useful to modern economics as astrology is to astronomy. Instead of getting left behind by the scientific movement it was unfortunately bolstered.
If you are really interested in what science is telling us about economics (more especially the intensely flawed assumptions of neoclassical economic thought) this is a good place to start.
incentive based policy, or at the very least, policy with incentive considered, is pretty widespread and not wholesale bad.
look at picketty's book for example. inherited wealth and rentseeking discourage working and enterprise. this is an example of disincentive.
p.s. danglars lol you are not too good at this are you. if you actually read the thread whitedog basically ditched all kind of incentive concern in real policy. that's an empirical claim on the lack of incentive in the 'practical world.' this is a radical claim and a great overreaction.
On April 11 2014 17:15 IgnE wrote: The funny thing about economists' descriptions of the "marketplace" and financial transactions is that the people who actually do business know that the models are broken. Across campus from the economics department, where people spend their time rationalizing and celebrating the ideology of capitalism, you have the business school, where jonny went, and people actually learn how to run businesses by making profits, and selling people things through advertising. The foundational bedrock of advertisement is that you can convince people to buy your commodities over the commodities of someone else, not by rationally explaining the utility benefits of your commodity compared to theirs, not by providing them perfect information so that they can make a rational decision, but by manipulating how people feel about a certain product. Market values become completely detached from use values, even as they become impossible to predict because they are tied to the subconscious desires of people operating with imperfect information. And this is by design. Advertising ends up manufacturing demand in an inherently irrational way. How can you even talk about rational actors in a marketplace dominated by ephemeral desires that spring into and out of existence in response to social cues mediated through marketing departments?
Nevertheless, I didn't see any models proposed by Jonny or others that assumed people would spend their discretionary income in some dispassionate utilitarian way. Hypotheses and models have their own scope that's limited in some aspects and expansive in others. Your presumption that the irrational aspects of advertising somehow defeats any consideration of rational actors in markets is overstepping your own example. Think of financial markets, foreign markets, education markets, housing markets, health care markets, and others. Are all of these dominated by ephemeral desires, such that we throw away any model of behavior "because advertising?" It borders on the assertion that everyone with choice will choose wrong; so its best to outsource choice to ivory towers.
On April 11 2014 17:15 IgnE wrote: The funny thing about economists' descriptions of the "marketplace" and financial transactions is that the people who actually do business know that the models are broken. Across campus from the economics department, where people spend their time rationalizing and celebrating the ideology of capitalism, you have the business school, where jonny went, and people actually learn how to run businesses by making profits, and selling people things through advertising. The foundational bedrock of advertisement is that you can convince people to buy your commodities over the commodities of someone else, not by rationally explaining the utility benefits of your commodity compared to theirs, not by providing them perfect information so that they can make a rational decision, but by manipulating how people feel about a certain product. Market values become completely detached from use values, even as they become impossible to predict because they are tied to the subconscious desires of people operating with imperfect information. And this is by design. Advertising ends up manufacturing demand in an inherently irrational way. How can you even talk about rational actors in a marketplace dominated by ephemeral desires that spring into and out of existence in response to social cues mediated through marketing departments?
Nevertheless, I didn't see any models proposed by Jonny or others that assumed people would spend their discretionary income in some dispassionate utilitarian way. Hypotheses and models have their own scope that's limited in some aspects and expansive in others. Your presumption that the irrational aspects of advertising somehow defeats any consideration of rational actors in markets is overstepping your own example. Think of financial markets, foreign markets, education markets, housing markets, health care markets, and others. Are all of these dominated by ephemeral desires, such that we throw away any model of behavior "because advertising?" It borders on the assertion that everyone with choice will choose wrong; so its best to outsource choice to ivory towers.
Watch at least the first video I posted on 'predictable irrationality' and you'll see how it doesn't need to be 'advertising' to give us more than enough reason to essentially toss those antiquated models.
p.s. danglars lol you are not too good at this are you. if you actually read the thread whitedog basically ditched all kind of incentive concern in real policy. that's an empirical claim on the lack of incentive in the 'practical world.' this is a radical claim and a great overreaction.
I wonder if you happened to read "We should make some kind of pact for the future of this thread, like don't ever use the word incentive because everybody will know you're just a free marketist who don't know what he's talking about." He's in no ways alone in making radical claims, and this thread is more overreaction than reaction. Perhaps I react to discussion of banning words with a gentle gibe at some he holds dear and overuses. I do understand why you'd find another impression of where I was going.
On April 11 2014 17:15 IgnE wrote: The funny thing about economists' descriptions of the "marketplace" and financial transactions is that the people who actually do business know that the models are broken. Across campus from the economics department, where people spend their time rationalizing and celebrating the ideology of capitalism, you have the business school, where jonny went, and people actually learn how to run businesses by making profits, and selling people things through advertising. The foundational bedrock of advertisement is that you can convince people to buy your commodities over the commodities of someone else, not by rationally explaining the utility benefits of your commodity compared to theirs, not by providing them perfect information so that they can make a rational decision, but by manipulating how people feel about a certain product. Market values become completely detached from use values, even as they become impossible to predict because they are tied to the subconscious desires of people operating with imperfect information. And this is by design. Advertising ends up manufacturing demand in an inherently irrational way. How can you even talk about rational actors in a marketplace dominated by ephemeral desires that spring into and out of existence in response to social cues mediated through marketing departments?
Nevertheless, I didn't see any models proposed by Jonny or others that assumed people would spend their discretionary income in some dispassionate utilitarian way. Hypotheses and models have their own scope that's limited in some aspects and expansive in others. Your presumption that the irrational aspects of advertising somehow defeats any consideration of rational actors in markets is overstepping your own example. Think of financial markets, foreign markets, education markets, housing markets, health care markets, and others. Are all of these dominated by ephemeral desires, such that we throw away any model of behavior "because advertising?" It borders on the assertion that everyone with choice will choose wrong; so its best to outsource choice to ivory towers.
Watch at least the first video I posted on 'predictable irrationality' and you'll see how it doesn't need to be 'advertising' to give us more than enough reason to essentially toss those antiquated models.
I'm responding to IgnE and he's focused on advertising and markets. His last sentence gives a clue. I'm not going to debate a video any more than another argument in absentia or "reading this book would change your mind." IgnE's post presumes too much, overstates effects, and that's what I responded to.
On April 11 2014 17:15 IgnE wrote: The funny thing about economists' descriptions of the "marketplace" and financial transactions is that the people who actually do business know that the models are broken. Across campus from the economics department, where people spend their time rationalizing and celebrating the ideology of capitalism, you have the business school, where jonny went, and people actually learn how to run businesses by making profits, and selling people things through advertising. The foundational bedrock of advertisement is that you can convince people to buy your commodities over the commodities of someone else, not by rationally explaining the utility benefits of your commodity compared to theirs, not by providing them perfect information so that they can make a rational decision, but by manipulating how people feel about a certain product. Market values become completely detached from use values, even as they become impossible to predict because they are tied to the subconscious desires of people operating with imperfect information. And this is by design. Advertising ends up manufacturing demand in an inherently irrational way. How can you even talk about rational actors in a marketplace dominated by ephemeral desires that spring into and out of existence in response to social cues mediated through marketing departments?
Nevertheless, I didn't see any models proposed by Jonny or others that assumed people would spend their discretionary income in some dispassionate utilitarian way. Hypotheses and models have their own scope that's limited in some aspects and expansive in others. Your presumption that the irrational aspects of advertising somehow defeats any consideration of rational actors in markets is overstepping your own example. Think of financial markets, foreign markets, education markets, housing markets, health care markets, and others. Are all of these dominated by ephemeral desires, such that we throw away any model of behavior "because advertising?" It borders on the assertion that everyone with choice will choose wrong; so its best to outsource choice to ivory towers.
Watch at least the first video I posted on 'predictable irrationality' and you'll see how it doesn't need to be 'advertising' to give us more than enough reason to essentially toss those antiquated models.
I'm responding to IgnE and he's focused on advertising and markets. His last sentence gives a clue. I'm not going to debate a video any more than another argument in absentia or "reading this book would change your mind." IgnE's post presumes too much, overstates effects, and that's what I responded to.
Perhaps you're right. But you're suggestion avoids the larger point it seems he was making, (either way I'm making it) which I presented in a less rhetorical and more practical and constructive manner.
After just commenting on the nature of the conversation you go and do what it seemed like you were complaining about.
While the specifics he was pointing out there may not apply to all markets, there are comparable effects in all of those markets. You refusing to learn about them (or accept them) is not a justifiable reason to claim they don't exist or haven't been observed or don't significantly undermine what appears to be your position..
It's not the 'irrational aspects of advertising' that undermines the 'consideration of rational actors in markets' its the FACT that people regularly behave in a predictably IRRATIONAL way. So whether it's advertising or any of the other countless cognitive illusions we are susceptible to, our current knowledge makes neoclassical models look foolish at best or just plain malicious on the darker side.
banning a word is a discussion about language but the argument used to support the banning is not semantics. let's make a distinction between two claims about incentive. the stronger claim is that incentive does not exist/bad empirical mechanism, the weaker claim is that it is overused and easily misleading. whitedog is making the former claim. clarifying this distinction is a semantics point, but the substance of the disagreement is over whether hte stronger claim is true. please don't go off saying lol semantics.
greenhorizons you are confusing having rationality as a simplifying assumption in your models with holding it always true. to equate the two you need the additional condition that economists always hold their models to describe reality perfectly.
igne's point about marketing is pretty good and obvious. usually people take macroeconomics ot represent economics and of course macro has a lot of vague stuff. but marketing is mostly there to show that even in micro you get these real human behavior that isn't even accountable by the usual shtick of rational agents. lel revealed preferences
On April 11 2014 21:50 oneofthem wrote: banning a word is a discussion about language but the argument used to support the banning is not semantics.
greenhorizons you are confusing having rationality as a simplifying assumption in your models with holding it always true. to equate the two you need the additional condition that economists always hold their models to describe reality perfectly.
igne's point about marketing is pretty good and obvious. usually people take macroeconomics ot represent economics and of course macro has a lot of vague stuff. but marketing is mostly there to show that even in micro you get these real human behavior that isn't even accountable by the usual shtick of rational agents. lel revealed preferences
I'm not, but even as a 'simplifying assumption' it's ridiculous on it's face. I get why we would use it when it was a fresh idea and we didn't know better. But we know better now. There is no scientific reason to hold on to it.
There are immensely better 'simplifying assumptions' out there to use. Continuing to support and defend antiquated and dangerously inaccurate models with those built-in assumptions is often more hurtful than helpful.
I mean why not sacrifice some cows to the rain gods, harvest all our grain by scythe, and send all our messages by runner while we're holding onto such an antediluvian economic understanding too?
if you have agents in your model, it is then necessary to have functions that describe their behavior. as long as you assert some kind of function, even dynamic or with some randomness, there's rationality involved in your model. the point is, rational is not a normative term in economics (i.e. claiming that people are reasonable, or that their reasons are rational), it is just a function that represents what people value, or how they act to maximize whatever, whatever that may be.
even outside of neoclassical modeling you do have rationality as a simplifying assumption if you have agents in your model. take a thermodynamics physics model for example. the difference is that in the neoclassical model the agent interactions are ridiculously constructed and the emergent behavior ignored.
you are pretty angry at economics and that's fine but it's a bit more complicated than you make it out to be.
On April 11 2014 22:13 oneofthem wrote: if you have agents in your model, it is then necessary to have functions that describe their behavior. as long as you assert some kind of function, even dynamic or with some randomness, there's rationality involved in your model. the point is, rational is not a normative term in economics (i.e. claiming that people are reasonable, or that their reasons are rational), it is just a function that represents what people value, or how they act to maximize whatever, whatever that may be.
even outside of neoclassical modeling you do have rationality as a simplifying assumption if you have agents in your model. take a thermodynamics physics model for example. the difference is that in the neoclassical model the agent interactions are ridiculously constructed and the emergent behavior ignored.
you are pretty angry at economics and that's fine but it's a bit more complicated than you make it out to be.
Not economics just the Neoclassical models mainly (more specifically how they are used to manipulate people into believing things that just aren't true). It's about as helpful as phrenology is at predicting behavior.
You're right it is really complicated though. But the fallacy of Neoclassical economics really isn't so much.
EPT
