3 ms·

>Maybe everyone complains about bad behaviour of their insurance company, but that does not mean they'll take a higher premium Exactly. >There's something her

>Maybe everyone complains about bad behaviour of their insurance company, but that does not mean they'll take a higher premium Exactly. >There's something here about "consumer" psychology and choices that is hard to capture in the concrete terms economists like to formalize using. That some/most economists like to use. There is a huge field in economics (and econophysics and stuff) that focused on actual irrational behaviour (like trend-following, trying to time the market, predicting the 'mood' of the market). I find this a very interesting field of study. My god the rational agent model is so bloody stupid but it makes calculations feasible, that's literally the only reason we use it nowadays ... There is one thing you can't buy. You can't buy love* * with exceptions of course

personlurking 11y ago
Former Uruguay president Mujica has some thoughts on your last statement regarding things you can't buy (https://www.youtube.com/watch?v=0JXMpQf2XyE https://www.youtube.com/watch?v=0JXMpQf2XyE)
- rogeryu 11y ago
  Thanks. That is a very valuable statement. Something to keep in mind!
NoGravitas 11y ago
And home-grown tomatoes.
djsumdog 11y ago
It's like people buying beats audio headphones.
jerf 11y ago
"My god the rational agent model is so bloody stupid but it makes calculations feasible, that's literally the only reason we use it nowadays ..." I find myself surprisingly often having to remind people that a world in which 64GB of RAM, 16 cores, a dozen terabytes of storage, and programming environments that let people harness all of these things, can all come out to a budget within reach of a middle-class individual who really wants it, is a VERY recent development, one still sinking in to the rest of the world. Rational agents have really always been known to be false, but good luck in 1980 getting an economist to write any sort of simulation of 100 million agents doing something slightly irrational to see what happens. They're going to face some pretty stiff competition for the supercomputer time that would represent... and the supercomputer in question would still be grossly underpowered compared to modern systems, so it would take some clever programming too. Even as clock speeds may have frozen, even in the last 5 years there has been a noticeable drop in the price of computing power. Beating up past economists for using the rational agent model is like getting beaten by people 50 years in our future for not just using AIs to solve problems, just because the phone in their pocket is populated by a couple dozen human-intelligent entities running locally, to say nothing of the civilization in "the cloud".
- Retric 11y ago
  Agents are not just irrational, but also acting with limited information and limited computation. Amusingly, we have trouble getting a few hundred agents to act reasonably in RTS games, modeling 100's of millions of people for long periods of time is just shy of ludicrous.
  - jerf 11y ago
    But if you want to make pronouncements about how irrational agents actually act, a prerequisite to having any sort of scientific confidence. People on HN, not being economists and usually in a polemical mood when this topic comes up, generally strike me as thinking that "people are not entirely rational -> people are entirely irrational -> all possible theories of economics have now collapsed to the very simple thing I already believed", especially convenient when the latter amounts to "the benevolent state should manage everything because people are dumb". ("And let's not think about the fact the benevolent state itself is made out of people.") But that's wrong; humans are not "generally" irrational, they are specifically irrational in very human ways, and the introduction of non-rational agents greatly expands the possibility space of economic theories, it does not contract it to an obvious point. You could narrow it back down to roughly the same sized space as we started with if you could precisely characterize the exact ways in which the agents are irrational, but we can not currently do that. There's a long history of the very irrationality of humans getting in the way of determining what behaviors are irrational! Or, in other words, it is not necessarily obvious what is irrational. A simple example is loss aversion; is it irrational? Well, when you consider that in the real world, "0" can mean "starving to death", suddenly taking small, safe bets in preference to large, unsafe bets even when the latter nominally has a larger expected payoff can end up being rational, inasmuch as the former actually results in a longer expected lifespan. Determining "rational" is really quite hard, and I rather expect more "human irrationalities" to be determined to be "more rational than the putatively-rational simpler model" in the future. Along with a heavy dose of "yes, this is irrational, and we have this in the species because it was harmless up to about 100 years ago". You can't map irrationalities to macroeconomics with anything less than this scale of simulation; the entire point of the rational agent was to make simple equations model things, the very point of abandoning that model is recognizing that the economy can only be modeled by more complicated models that aren't captured by those equations. Unfortunately, the universe does not have a law in it that says we will have the power to know what it is we want to know in any practical manner. And 100s of millions was just an example. Just as rough in the 1980s would have been the lack of practical programming environments. You can still do 100,000 agents today with a reasonable amount of state in a simply NumPy script that runs on your local desktop. That was not true up until fairly recently, because there would have been no solution as powerful as NumPy running on modern hardware.
hueving 11y ago
Actually people not switching products because they still like one of the major features (being cheap in the insurance case or having personalized results in the Google case) is perfectly compatible with old school economics and the rational agent model. The reason people complain is simple. They don't actually want to switch to any of the alternatives so they want their current choice to be fixed.
chimeracoder 11y ago
> That some/most economists like to use. There is a huge field in economics (and econophysics and stuff) that focused on actual irrational behaviour (like trend-following, trying to time the market, predicting the 'mood' of the market) Behavioral economics is really interesting, yes, but this isn't even an example of irrational behavior (in the technical meaning of "rational"). What a consumer says they want isn't necessarily the same as what they do want, as determined by their revealed preferences (ie, what they do with their actions). If those are self-consistent, the behavior is rational, even if it contradicts what they say they want.

personlurking 11y ago

Former Uruguay president Mujica has some thoughts on your last statement regarding things you can't buy (https://www.youtube.com/watch?v=0JXMpQf2XyE https://www.youtube.com/watch?v=0JXMpQf2XyE)

rogeryu 11y ago
Thanks. That is a very valuable statement. Something to keep in mind!

NoGravitas 11y ago

And home-grown tomatoes.

djsumdog 11y ago

It's like people buying beats audio headphones.

jerf 11y ago

"My god the rational agent model is so bloody stupid but it makes calculations feasible, that's literally the only reason we use it nowadays ..." I find myself surprisingly often having to remind people that a world in which 64GB of RAM, 16 cores, a dozen terabytes of storage, and programming environments that let people harness all of these things, can all come out to a budget within reach of a middle-class individual who really wants it, is a VERY recent development, one still sinking in to the rest of the world. Rational agents have really always been known to be false, but good luck in 1980 getting an economist to write any sort of simulation of 100 million agents doing something slightly irrational to see what happens. They're going to face some pretty stiff competition for the supercomputer time that would represent... and the supercomputer in question would still be grossly underpowered compared to modern systems, so it would take some clever programming too. Even as clock speeds may have frozen, even in the last 5 years there has been a noticeable drop in the price of computing power. Beating up past economists for using the rational agent model is like getting beaten by people 50 years in our future for not just using AIs to solve problems, just because the phone in their pocket is populated by a couple dozen human-intelligent entities running locally, to say nothing of the civilization in "the cloud".

Retric 11y ago
Agents are not just irrational, but also acting with limited information and limited computation. Amusingly, we have trouble getting a few hundred agents to act reasonably in RTS games, modeling 100's of millions of people for long periods of time is just shy of ludicrous.
- jerf 11y ago
  But if you want to make pronouncements about how irrational agents actually act, a prerequisite to having any sort of scientific confidence. People on HN, not being economists and usually in a polemical mood when this topic comes up, generally strike me as thinking that "people are not entirely rational -> people are entirely irrational -> all possible theories of economics have now collapsed to the very simple thing I already believed", especially convenient when the latter amounts to "the benevolent state should manage everything because people are dumb". ("And let's not think about the fact the benevolent state itself is made out of people.") But that's wrong; humans are not "generally" irrational, they are specifically irrational in very human ways, and the introduction of non-rational agents greatly expands the possibility space of economic theories, it does not contract it to an obvious point. You could narrow it back down to roughly the same sized space as we started with if you could precisely characterize the exact ways in which the agents are irrational, but we can not currently do that. There's a long history of the very irrationality of humans getting in the way of determining what behaviors are irrational! Or, in other words, it is not necessarily obvious what is irrational. A simple example is loss aversion; is it irrational? Well, when you consider that in the real world, "0" can mean "starving to death", suddenly taking small, safe bets in preference to large, unsafe bets even when the latter nominally has a larger expected payoff can end up being rational, inasmuch as the former actually results in a longer expected lifespan. Determining "rational" is really quite hard, and I rather expect more "human irrationalities" to be determined to be "more rational than the putatively-rational simpler model" in the future. Along with a heavy dose of "yes, this is irrational, and we have this in the species because it was harmless up to about 100 years ago". You can't map irrationalities to macroeconomics with anything less than this scale of simulation; the entire point of the rational agent was to make simple equations model things, the very point of abandoning that model is recognizing that the economy can only be modeled by more complicated models that aren't captured by those equations. Unfortunately, the universe does not have a law in it that says we will have the power to know what it is we want to know in any practical manner. And 100s of millions was just an example. Just as rough in the 1980s would have been the lack of practical programming environments. You can still do 100,000 agents today with a reasonable amount of state in a simply NumPy script that runs on your local desktop. That was not true up until fairly recently, because there would have been no solution as powerful as NumPy running on modern hardware.

hueving 11y ago

Actually people not switching products because they still like one of the major features (being cheap in the insurance case or having personalized results in the Google case) is perfectly compatible with old school economics and the rational agent model. The reason people complain is simple. They don't actually want to switch to any of the alternatives so they want their current choice to be fixed.

chimeracoder 11y ago

> That some/most economists like to use. There is a huge field in economics (and econophysics and stuff) that focused on actual irrational behaviour (like trend-following, trying to time the market, predicting the 'mood' of the market) Behavioral economics is really interesting, yes, but this isn't even an example of irrational behavior (in the technical meaning of "rational"). What a consumer says they want isn't necessarily the same as what they do want, as determined by their revealed preferences (ie, what they do with their actions). If those are self-consistent, the behavior is rational, even if it contradicts what they say they want.