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It's true. The standard economic assumptions (people have rational preferences, are purely selfish, and have perfect information) don't reflect real-world human
by ggreer 10y ago
It's true. The standard economic assumptions (people have rational preferences, are purely selfish, and have perfect information) don't reflect real-world humans. But that's what makes them robust. Human behavior and culture can change drastically, but standard econ tools still work. They can predict and explain outcomes in ancient Rome just as effectively as present-day San Francisco.
Behavioral economics is very useful, and there are still tons of unexplored questions in the field. But importantly: behavioral econ is more speculative than standard econ. Behavioral econ models depend on getting both econ and human psychology right. Even if such models are fleshed-out, human behavior is quite plastic. So behavioral models are less likely to be correct when applied outside of present-day western culture.
- pnutjam 10y ago"Human behavior and culture can change drastically, but standard econ tools still work." But they don't work, econ is not much better then throwing bones.
- pzone 10y agoDo you honestly believe that? Would you say "psychology is not much better than throwing bones" or "epidemiology is not much better than throwing bones?" Because the demands for statistical rigor in economics are far greater than in those fields. http://qje.oxfordjournals.org/content/by/year http://qje.oxfordjournals.org/content/by/year
- evgen 10y agoStatistically rigorous astrology is still bullshit, no matter how much curve-fitting you apply because the core premise is false. Most psychology, as we are now learning when people actually try to replicate experiments, is also bullshit. If economics is starting from equally flawed initial premises regarding individual choice and decision-making, as I and many others believe, then no amount of statistical rigor in the process will change the field from being a contived method of throwing darts and making grand claims about how much you understand dartboards and the aerodynamics of darts.
- mr_overalls 10y agoWell, economists like Deirdre McCloskey have argued that many empirical economic studies have been poorly reported, statistically-speaking. https://web.archive.org/web/20080625054144/http://www.econjournalwatch.org/pdf/ZiliakMcCloskeyAugust2004.pdf https://web.archive.org/web/20080625054144/http://www.econjo...
- mr_overalls 10y agoI agree that there are many valid criticisms of neoclassical economics, ranging from assumptions of equilibrium and human rationality, to the emphasis on economic growth clashing with the reality of finite ecological resources on Earth. However, I'd ask if you typically expect a field of study to be perfect before you'd consider it useful? Do you expect psychology to completely understand the human brain before you'd seek help for substance abuse? Or for physicists to understand super-symmetry before you'd use a cell phone?
- notahacker 10y ago> Behavioral econ models depend on getting both econ and human psychology right This is the important bit. The much criticised "rational expectations revolution" in modern economics was less about popularising a hypothesis that people were on average good at anticipating the future and more a case of arguing that if a proposed policy stopped working if humans started anticipating how it would affect them, it probably wasn't a good policy...