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I guess the scientific term is https://en.wikipedia.org/wiki/Homo_economicus https://en.wikipedia.org/wiki/Homo_economicus. The classic experiment is probably t

I guess the scientific term is https://en.wikipedia.org/wiki/Homo_economicus https://en.wikipedia.org/wiki/Homo_economicus. The classic experiment is probably the Ultimatum game. And that's so old, you're tempted to say: see – they did notice the flaws in their theories! Yes, economists will readily admit to these flaws and encourage you to keep it in mind when evaluating their predictions and prescriptions. Unfortunately, people aren't just marginally different from the models. Just yesterday I violated transitivity of preferences when choosing lunch. I did an evaluation of GDO growth forecasts for my bachelor thesis. None of the institutions (Central banks etc.) managed to outperform a well-adjusted random number generator.

jernfrost 10y ago
I don't think economist always are that frank about the limits of their models. E.g. Milton Friedman I think seemed to think that the world worked mostly has homo economicus. He had some rather ridiculous examples. E.g. he was touring a factory in Hong Kong and claimed workers had picked noisy and hazardous work environments over more pleasant ones, because it paid better. That strikes me as a guy with the head in the cloud lost his his theories. Jobs don't exist in endless varieties like that. If I'd rather have a better health insurance but lower paid job, I can't easily change to an almost identical job, with just those differences. I also remember him arguing why it was rational for Ford or GM to install a cheap fix for dangerous fuel tanks. His straw man argument was that an infinitely safe car would cost infinitely amounts of money. With such arguments you can argue in favor of no minimum standards for anything. Never mind that he failed to see the blindingly obvious problem. It simply didn't make any economic sense because any car company making such a cynical calculation would severely damage their reputation and thus their sales. It only works for companies who manage to cover up. And Milton Friedman is one of our most celebrated economists. Sure he create some great theories, but he seemed also to not heed to typical advice of not taking models too literal. He basically advocated policies based on rather fundamentalists interpretations of economic models. If he could do that, then surely lots of other economists would fail in the same manner.
- tenkabuto 10y ago
  > He had some rather ridiculous examples. E.g. he was touring a factory in Hong Kong and claimed workers had picked noisy and hazardous work environments over more pleasant ones, because it paid better. How is this a ridiculous example? Did he just invent it or was that indeed the actual reason why they were working there versus a more pleasant place?
yummyfajitas 10y ago
Every economist knows homo economicus is an approximation to reality. Large amounts of economics is about mathematically modelling deviations from it and then checking the results against data. I feel like you are criticizing some "econ 101" straw man. If you can find violations of transitivity that apply in aggregate (rather than just to one guy being in a funny mood one time), congrats! Now go figure out how to exploit this money pump to become rich.

jernfrost 10y ago

I don't think economist always are that frank about the limits of their models. E.g. Milton Friedman I think seemed to think that the world worked mostly has homo economicus. He had some rather ridiculous examples. E.g. he was touring a factory in Hong Kong and claimed workers had picked noisy and hazardous work environments over more pleasant ones, because it paid better. That strikes me as a guy with the head in the cloud lost his his theories. Jobs don't exist in endless varieties like that. If I'd rather have a better health insurance but lower paid job, I can't easily change to an almost identical job, with just those differences. I also remember him arguing why it was rational for Ford or GM to install a cheap fix for dangerous fuel tanks. His straw man argument was that an infinitely safe car would cost infinitely amounts of money. With such arguments you can argue in favor of no minimum standards for anything. Never mind that he failed to see the blindingly obvious problem. It simply didn't make any economic sense because any car company making such a cynical calculation would severely damage their reputation and thus their sales. It only works for companies who manage to cover up. And Milton Friedman is one of our most celebrated economists. Sure he create some great theories, but he seemed also to not heed to typical advice of not taking models too literal. He basically advocated policies based on rather fundamentalists interpretations of economic models. If he could do that, then surely lots of other economists would fail in the same manner.

tenkabuto 10y ago
> He had some rather ridiculous examples. E.g. he was touring a factory in Hong Kong and claimed workers had picked noisy and hazardous work environments over more pleasant ones, because it paid better. How is this a ridiculous example? Did he just invent it or was that indeed the actual reason why they were working there versus a more pleasant place?

yummyfajitas 10y ago

Every economist knows homo economicus is an approximation to reality. Large amounts of economics is about mathematically modelling deviations from it and then checking the results against data. I feel like you are criticizing some "econ 101" straw man. If you can find violations of transitivity that apply in aggregate (rather than just to one guy being in a funny mood one time), congrats! Now go figure out how to exploit this money pump to become rich.