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The real problem with economics and human psychology is not so much that humans are irrational Though they often are, they are actually less so in economic con

The real problem with economics and human psychology is not so much that humans are irrational Though they often are, they are actually less so in economic contexts than in most others. I think the bigger problem is that classical economics has a rather limited view of "rationality". Just because something doesn't give an immediate or narrowly quantifiable return does not necessarily make it irrational in any reasonable sense.

kalid 16y ago
Exactly. Classical economics assumes everyone's utility function == income. What about the pleasure of a job well done, companionship/relationship, job satisfaction, etc.? Well, since they can't be quantified they are ignored.
- mhb 16y ago
  That's silly. In order to make comparisons, utility (including the intangibles you mention) can be and is estimated in terms of money. If they don't do that here, that is their failing and not one of economics in general.
  - anamax 16y ago
    > That's silly. In order to make comparisons, utility (including the intangibles you mention) can be and is estimated in terms of money. If they don't do that here, that is their failing and not one of economics in general. How about you go tell all of the economists that they're doing it wrong? While you're fixing economists, the rest of us will get along just fine with "economics doesn't model the real world very well". That may be pedantically wrong, but it's far more efficient.
billswift 16y ago
The problem with economics I see is not a problem with most economic analysis; they actually do a good job with most questions in microeconomics (to the extent that economics is the closest we have yet come to a social "science"). The problem I have is when they address what are basically psychological questions, like this article which is mostly on motivation, where their assumption of rationality is not particularly useful. In classical economic contexts, as I wrote in the original comment, people are actually about as rational as they ever get.

kalid 16y ago

Exactly. Classical economics assumes everyone's utility function == income. What about the pleasure of a job well done, companionship/relationship, job satisfaction, etc.? Well, since they can't be quantified they are ignored.

mhb 16y ago
That's silly. In order to make comparisons, utility (including the intangibles you mention) can be and is estimated in terms of money. If they don't do that here, that is their failing and not one of economics in general.
- anamax 16y ago
  > That's silly. In order to make comparisons, utility (including the intangibles you mention) can be and is estimated in terms of money. If they don't do that here, that is their failing and not one of economics in general. How about you go tell all of the economists that they're doing it wrong? While you're fixing economists, the rest of us will get along just fine with "economics doesn't model the real world very well". That may be pedantically wrong, but it's far more efficient.

billswift 16y ago

The problem with economics I see is not a problem with most economic analysis; they actually do a good job with most questions in microeconomics (to the extent that economics is the closest we have yet come to a social "science"). The problem I have is when they address what are basically psychological questions, like this article which is mostly on motivation, where their assumption of rationality is not particularly useful. In classical economic contexts, as I wrote in the original comment, people are actually about as rational as they ever get.