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The Prize in Economic Sciences 2017
- baron816 9y agoSeems like a rational choice.
- amrrs 9y agoConsidering the fact that Richard Thaler made a cameo in The Big Short Movie that was primarily demeaning Wall Street Banks and Economists who played along in the crisis, itself makes him an Economist who stands out. http://www.chicagobusiness.com/article/20160226/NEWS01/160229871/u-of-c-prof-in-big-short-cameo-is-a-stock-picking-star http://www.chicagobusiness.com/article/20160226/NEWS01/16022...
- VHRanger 9y agoI mean that doesn't really make him stand out; most economists will agree with the Big Short's account of the crisis. Except perhaps the coffee shop discussion at the end where Steve Carrell states banks did it because they expected to get bailed out (all evidence points that they didn't expect to get bailed out a priori and that they simply did it because shareholders and managers are greedy short sighted morons). That said, Thaler is an excellent choice
- FabHK 9y agoWell, bankers did have an incentive to make bigger bets though, because on the upside they'd win more, and on the downside, well, who cares, the bank might go bust or be bailed out - it doesn't really matter, the downside (for the managers) is floored. Nobody has gone to jail, right. And then, to the extent that their assumption was that the payment system and economy does not collapse, it was predicated on a public bail out. Anat Admati, Stanford econ prof, has a popular book out, The Bankers' New Clothes that makes a case for much simpler and stricter bank regulation (basically, force them to hold much more capital (i.e. equity)), which makes a lot of sense to me.
- VHRanger 9y agoAgreed, bank managers need to face personal consequences for reckless behavior that has negative externalities on society. I'm personally in favor of criminal prosecution but I don't see that happening. Indeed I'm generally in favor of keeping banks large for returns to scale benefits, but the political perversion of large banks may offset that benefit
- nickik 9y agoYou will find a very large amount of economist who disagree with the idea that the stuff in Big Short caused the recession.
- paulpauper 9y agoisn't the prize usually awarded to multiple people? lucky guy gets to keep all the $ then
- DominikPeters 9y ago25 out of 49 econ nobel prizes were awarded to one person only. https://www.nobelprize.org/nobel_prizes/facts/economic-sciences/index.html https://www.nobelprize.org/nobel_prizes/facts/economic-scien...
- indescions_2017 9y agoExcellent pick! Applied "nudge theory," or "libertarian paternalism," is proving to be the panacea for massive social change. From NYC's decision to offer free lunches for all public school students. To the design of recycle bins in Amsterdam. Simple yet intuitive communication of the optimality of rational choosing, without penalizing too harshly our irrational tendencies. I think the next logical extension of neuroeconomics is neuropolitics. Viewing powerplays between Trump <--> Kim or Netanyahu <--> Putin through the lens of game theory where all actors are moving optimally toward a "win" condition provides diminishing returns. Watching leaders actions as the result of irrational biases operating with imperfect information is proving a closer model of reality.
- steve_barton 9y ago> From NYC's decision to offer free lunches for all public school students. Wait, what?! Why would the city spend money on subsidising the lunch of children with parents rich enough to send them to a public school?
- chrisseaton 9y agoI think in the United States, 'public school' means the exact opposite of what it means elsewhere - there it means a school run by the city that anyone can go to.
- Danieru 9y agoYou might be surprised to hear this, but New York city is in America. Thus while Public School in the UK are privately owned, elitist, and tuition charging, in America it is the opposite. In America public schools are the schools the public attend which the state finances.
- dang 9y ago> You might be surprised to hear this, but New York city is in America Please don't break the rules by posting snark here. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- ghaff 9y agoWhile his co-authored Nudge is an easy read and is probably better known, his more recent Misbehaving gives a good account of how his career and the field developed. It’s really interesting stuff. I actually had a couple of grad courses with Thaler when he was at Cornell. I still have a draft copy of one of his earlier books in Behavioral Decision Theory somewhere.
- stablemap 9y agoHe has a few popular books that are worth reading. The recent Misbehaving is in part a memoir of his work. http://www.misbehavingbook.org http://www.misbehavingbook.org
- reubensutton 9y agoI enjoyed this much more than Thinking Fast and Slow
- option_greek 9y agoI always wondered if Satoshi was not anonymous, whether he would have been nominated for Economic nobel. Of course, most of the ideas were pre-existing but he did put together the final pieces. But then he could very well be behind bars now based on how the story unfolded.
- amrrs 9y agoor on a flip side, he could be facing something like Edward Snowden?
- matt4077 9y agoI'm just about 100% certain that they would win the price if they're ever outed (and alive). I'm as critical of bitcoin as one can be, mostly because I can find no group of people more obnoxious as bitcoin fans. But it is undeniably one of the most interesting experiments in economics of our time. Also the NSA supposedly knows their identity, and I'm willing to believe that story because it seems plausible that they have exactly the data one would need (i. e. a large archive of emails written by the general public to match his style). Contrary to conspiracies, the government does actually need you to break a law to arrest you. And Satoshi hasn't broken any laws, nor are governments as paranoid of bitcoin as everyone seems to think,
- mathattack 9y agoI can't imagine him winning it. The Nobels in Economics are exclusively academics with large bodies of peer reviewed work. The ones who have veered towards practical projects (or hedge funds) still have long formal academic histories. The committee [0] is 100% academics. Unless Satoshi had a strong background of other papers in esteemed journals, he wouldn't win it. (It's not a "pop culture" prize like Peace) [0] https://www.nobelprize.org/nobel_prizes/economic-sciences/prize_awarder/committee.html https://www.nobelprize.org/nobel_prizes/economic-sciences/pr...
- abecedarius 9y agoIt'd be kind of wasted on a billionaire. Maybe someday he'll endow an annual Satoshi Prize in Being Awesome.
- peterwwillis 9y agoI don't understand why this field exists. They take observations of human behavior that have been common sense since... well, since humans have used money, and then try to wrap it in some sort of "scientific process" to prove these things empirically as if they weren't already obvious. Is it because economic theorists before had such stupid ideas and now they have to disprove every old unrealistic theory step by step?
- ghaff 9y agoBehavioral economics isn't really a separate field and, as Thaler notes in one of his recent books, behavioral ideas are being rolled into broader economics theory. The issue is that, historically, economics as a field of academic study made simplifying assumptions that pretty much everyone knew weren't completely true. But it's one thing to realize that there are anecdotal observations of irrationality and starting to make those some sort of coherent framework.
- titzer 9y ago> They take observations of human behavior that have been common sense since... well, since humans have used money, and then try to wrap it in some sort of "scientific process" to prove these things empirically as if they weren't already obvious. Welcome to Science, dude. Its bread and butter, repeatable experimentation, is the proving ground on which common sense is either quantified or rejected. This is how we climb out of the muck of our stupid prejudices.
- bambax 9y agoAn irrational thing Amazon knows and many, many other online sellers don't: people don't want to pay for delivery. That is, they'd much rather pay $20 total with free delivery, than, for example, $15 for the goods + $3 for delivery. It's amazing the number of non-Amazon online shops who still don't seem to know this.
- jk563 9y agoI've been guilty of this on several occasions, happily paying £5 more for an item because it's on Prime as opposed to a smaller delivery fee.
- Density 9y agoShoppers get upset when sellers advertise one price online and then try charging them another. No hidden voodoo psychology there.
- olympus 9y agoI think Amazon's case is a little more specific. People want trustworthy delivery, and they like getting a few larger packages rather than many small packages. I could buy a few items from non-Prime sellers with free shipping, but then I'm going to get a bunch of different boxes spread out over a few days due to different sellers and shipping speeds. If I pay a little extra per item I know that Amazon will ship my stuff quickly and it usually comes in a single package, unless the items in my order are unusually different from each other.
- chrisseaton 9y agoThat's not irrational - it's saving time, effort, and grief having to think about how much delivery will cost.
- dhimes 9y agoI took GP's "irrational" in the economic sense of always trying for the best economic outcome, not the psychological outcome.
- KingMob 9y agoWhile I love the behavioral economists (esp. Kahnemann and Tversky), a lot of psychologists have told economists for a long time that assuming basic rationality as a starting point was a fundamental error in the field. Taking it as an axiom has led to all sorts of misguided efforts and wasted time. From the article: "That's the point: It's obvious to anyone who pays any attention at all to himself or his fellow human beings that we are not maximizers, or optimizers, or logical, or even all that sensible." and "[his professors] argued that human irrationality didn't matter, for the purpose of economic theory, because it wasn't systematic."
- olympus 9y agoAssuming rational actors simplifies theory to make it within reach of undergraduate students, so it is useful to get people started in the field. Lots of things are explained by rational choice, such as the actions of many corporations (that have research analysts collecting and refining data to make better decisions). I think a lot of irrational actions taken by humans is better explained by them having incomplete information. The contrived nature of these experiments occludes their structure to the participants. Using the viral disease/antidote example: If you presented each scenario to the students at the same time and then explained how they reduced to the exact same decision, then many students (but probably not all) would assign the same price to each scenario. Instead what these experiments do is say "make a decision," then they say "make a decision on this new complicated phrasing which makes you think that the situation has changed but only I realize that it is actually the same." No surprise there when the outcome is different.
- pcarolan 9y agoPhysicists assume things are spheres and use that to solve a bunch of problems. It's important to know 'why' economists use this abstraction for modeling before patently dismissing it. Economists notice that on average, people in the aggregate tend to behave rationally sometimes. Scrutiny should be applied to the assumptions, but it can still help explain economic systems.
- titzer 9y ago
- dang 9y agoA Michael Lewis article about Thaler was also posted: https://news.ycombinator.com/item?id=15432905 https://news.ycombinator.com/item?id=15432905. Edit: also a Thaler article from 2015 at https://news.ycombinator.com/item?id=15433053 https://news.ycombinator.com/item?id=15433053.
- TomorrowMars 9y agoEconomic Sciences deserve to take over the whole Nobel prize. They should get all the prizes. They have proven themselves as the ultimate woodo wizards of "applied" scientists. If you go to source page, you will see that the full name of the prize is "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel" Why? There is no Nobel prize for economics. This was a self-congratulatory add-on instituted by bankers in an attempt to add respectability to the turbulent industry of studying abstract virtual value that is not just affected, but created by the observer. Let me repeat myself. There is no Nobel prize for economics. The fact that the majority of people here, and worldwide, fail to notice that, is the only proof needed that economics is the ultimate science of them all. And the sweet little Swedes had to bail out their bankers after the US fiasco. At least the bankers spend some of that taxpayer money to keep the "prize" going.
- FabHK 9y agoMost people are aware that it's a post-hoc Nobel memorial price, and laureates are selected by the Royal Swedish Academy of Sciences (same as physics and chemistry), are announced with the other Nobel Prize laureates, and receive the award at the same ceremony. So, it's for all practical purposes the Nobel price in economics, and your unsubstantiated post doesn't really add much.
- hudibras 9y agohttps://news.ycombinator.com/item?id=12678598 https://news.ycombinator.com/item?id=12678598 https://news.ycombinator.com/item?id=9915943 https://news.ycombinator.com/item?id=9915943 https://news.ycombinator.com/item?id=13702830 https://news.ycombinator.com/item?id=13702830 https://news.ycombinator.com/item?id=8448602 https://news.ycombinator.com/item?id=8448602 etc... We get it, the economics prize is not a true Nobel prize. It's tiresome to hear it every time the prize is mentioned.
- noddy1 9y agoActually, it does need to be repeated, because economists and their opinions and their "evidence" are being given too much credit by politicians and laypeople.
- dominotw 9y agofrom his amazon book >By a nudge we mean anything that influences our choices. A school cafeteria might try to nudge kids toward good diets by putting the healthiest foods at front. Hasn't this been tried in schools, does it actually work? Also, isn't this common sense ?
- throwaway287391 9y agoI have a question about an example referenced in the Bloomberg article linked from a previous discussion [1]. Quoting from the article: > He began with his own students, telling them to imagine that by attending his lecture, they had exposed themselves to a rare fatal disease. There was a 1 in 1,000 chance they had caught it. There was a single dose of the antidote: How much would they be willing to pay for it? > Then he asked them the same question, in a different way: How much would they demand to be paid to attend a lecture in which there is a 1 in 1,000 chance of contracting a rare fatal disease, for which there was no antidote? > The questions were practically identical, but the answers people gave to them were -- and are -- wildly different. People would say they would pay two grand for the antidote, for instance, but would need to be paid half a million dollars to expose themselves to the virus. Would classical economics really predict that people would give the same answers to these two questions? The article claims the two situations are "practically identical" but to me they seem clearly different: it makes perfect sense to me that many people would pay less of their money for the antidote knowing they've been exposed vs. the amount they'd need to be paid to voluntarily expose themselves to the risk. As a simple example, if one only has $1000 to their name, then $1000 is the max they could possibly pay for the antidote (assuming they can't get a loan), yet I'd expect that most wouldn't be willing to expose themselves to that risk just to double their money. I thought utility theory in classical economics recognized that the marginal utility of going from $1000 to $2000 is less than the marginal utility of going from $0 to $1000. [1] https://news.ycombinator.com/item?id=15432905 https://news.ycombinator.com/item?id=15432905
- savanaly 9y agoThere is the endowment effect, and then there is the effect of the diminishing marginal value of money. You're talking about the latter and it certainly is recognized in economics just about as far back in its history as you care to look. But Thaler was trying to demonstrate the former and it's the sort of insight he won the prize for theorizing about.
- throwaway287391 9y agoI see, thanks for the response. I guess I just dislike the example because it fails to untangle these two effects :)
- sjg007 9y agoHaven’t read this but if individuals aren’t economically rational, is the collective group? Or because we are organied in a hierarchy of decision makers (e.g. companies) are we always irrational?
- nickik 9y agoThere is a lot of research that tries to figure out how things actually work even if you assume irrational humans (or collectives). https://en.wikipedia.org/wiki/Institutional_economics https://en.wikipedia.org/wiki/Institutional_economics You can do the same thing with business. They are also not purely rational but the market causes those to die who are to irrational.
- nickik 9y agoHonestly, I really don't really like this pick. Behavioral economics is extremely popular, especially outside economists themselves. But the problem is that it keeps repeating the same findings. We get it, people are not rational. You can read 150 year old economics books that mention these things. There is a 'behavioral economics' movement every 40 year. The research that I find 100x more interesting is the research that actually looks at real world institutions and tries to figure out how it is possible that these things work even if you assume irrational humans. Why can you get almost anything delivered in 2 days if every single human in the chain is highly irrational. The Nobel in 2009 was about those sort of things, but they don't get enough attention.
- bluetwo 9y ago"Limited rationality" not "highly irrational". The traditional economic view is people act in their own self-interest. I would summarize this research by saying people act in their own perceived self-interest. Lots of times the two align, but there are cases when they don't, which I do find interesting and worthy of research.
- nickik 9y agoPoint taken. I think the research is very valid and interesting. I just question if this is most importent, or just a whats by far the most popular economics subject in the mainstream. Its a good PR move for the constent critics economics suffer from.
- jsnk 9y agoCheck out this Econtalk podcast with Richard Thaler [2006] http://www.econtalk.org/archives/2006/11/richard_thaler_1.html http://www.econtalk.org/archives/2006/11/richard_thaler_1.ht...