7 ms·

I received a Ph.D. in physics in 2010, throughout my training, my anecdotal experience was that of an echo chamber. I didn't fully realize it until I left acade

I received a Ph.D. in physics in 2010, throughout my training, my anecdotal experience was that of an echo chamber. I didn't fully realize it until I left academia. Although, it was slowly becoming apparent as the years passed. My experience was of a relatively small and closed group of physicists who reaffirmed each other's assumption that they were at the absolute peak of intellectual thought. Most of the professors imparted this mindset onto their graduate students and post docs. It fits pretty well with my experience that physicists would ignore the history of economic thought and believe that they could create a simple model that would accomplish what economists and philosophers have been hitherto unable to in the prior thousand years. But economics (or praxeology to be more general) is not physics. And a simple model of coin flips with random pairings and one risk limiting function isn't economics. When you have such hubris and make such simple mistakes as to assume that value is objective, it should be embarrassing. ------- I will add that I still am a physicist who likes to think about things like this. One addition I would make to the model is that the poorer a person is the larger a percentage they are willing to risk. It still doesn't get around the fact that this whole model is based around the fallacy of object value but I like playing with models.

chewz 7y ago
> the poorer a person is the larger a percentage they are willing to risk Utility function is logaritmic.
- duxut_staglatz 7y ago
  Is there any evidence that it is?
  - chewz 7y ago
    Pretty common assumption. [1] The need for money saturates slowly. Think about winning 1000 dollars (nice dinner pehaps), 10 000 (better car), 100 000 (larger appartment), .... , 10 000 000. At some point it doesn't matter if its 200 000 000 or 300 000 000. On the other hand a lotter ticket is 1$. What is the utility of 1$ - a can of coke pehaps. But the perspective of winning $1 000 000 - thats a nice idea to hold for a few days... So many people do despite the slim chances. [] https://economics.stackexchange.com/questions/23952/is-the-utility-of-money-actually-logarithmic https://economics.stackexchange.com/questions/23952/is-the-u... [] https://www.forbes.com/sites/rogerkay/2013/08/05/how-the-marginal-utility-of-money-balances-with-value/ https://www.forbes.com/sites/rogerkay/2013/08/05/how-the-mar...
    - duxut_staglatz 7y ago
      That's evidence for a concave utility function wrt income, not logarithmic per se. But your first link does cite evidence that _if_ utility is CRRA, we are not far from the case where utility is logarithmic
d0mine 7y ago
There is a crucial difference between physics and economic theories. Physics is a hard science. Physics works.
anovikov 7y ago
>he poorer a person is the larger a percentage they are willing to risk I don't agree with it. Poor people tend to be very risk-averse (they teach their kids to get "stable jobs" above everything else), and this puts them in a self-reciprocating loop of poverty. Many rich people who i know became so by repeatedly getting involved into "bold" things looked totally bullshit, and usually indeed was - apart from 1-2 in their lives that wasn't, and made them millions.
headsoup 7y ago
> the poorer a person is the larger a percentage they are willing to risk As a percentage, sure, but in real terms the poorer person doesn't have 'much' to lose (to be regained) over someone extremely rich risking the same percentage. The potential rewards are also likely to be immensely larger in percentage for the poor person too. But this is also relative risk against wealth in context. Comparing poor against poor there will still be comparable poor people with completely different risk profiles (basic example is one with children vs one without). The model I imagine must primarily establish reasonable/full context before determining any value factors.
- vannevar 7y ago
  As a percentage, sure, but in real terms the poorer person doesn't have 'much' to lose (to be regained) over someone extremely rich risking the same percentage. This is questionable. The assumption that a poor person can more easily regain their stake is shaky---a poor person who loses their money may become homeless, which could in turn make it harder for them to be employed, or if they are a trades person maybe they lose their tools or can no longer afford to rent them. By contrast, a rich person has access to credit lines and investors in their social network. For the poor who aren't wiped out below a critical threshold, then, it may be true, but you're not taking into account the significant number who drop below that threshold and may never recover. I would rephrase the original statement, "the poorer a person the larger percentage they are willing to risk" as "the poorer the person, the larger percentage they are forced to risk if they want to achieve comparable returns on a percentage basis."
  - kortilla 7y ago
    Rich people do not have access to credit lines if they don’t have assets to back the loans. And their rich friends certainly aren’t going to invest in someone who just lost a ton of money.
    - vannevar 7y ago
      That's better than a poor person, who does not have access to reasonably priced credit even in the unlikely event they have the collateral. And in reality, the rich often do have access to unsecured credit. They have that credit because they've made money in the past, and even if their current fortunes have turned, creditors and investors will often continue to invest in them.
emmelaich 7y ago
It's analogous to weight-loss arguments. It is true that calories = calories-in - calories-out. It cannot not be true. It just isn't helpful.
- hector_vasquez 7y ago
  How are you defining a "calorie"? The number printed on the package? Because that number is basically meaningless.
  - solveit 7y ago
    That number happens to be remarkably accurate. More accurate than required by law in fact. It also happens to accurately predict changes in a person's weight if you know everything they're eating.
    - V-2 7y ago
      While it certainly differs from country to country, FDA allows a discrepancy of 20%. That's significant. There have been studies that showed the labels to be off by 25%. And even if the numbers were accurate, they're still rule-of-thumbish, because human metabolism doesn't simply ingest all energy available in a food. For instance you'd absorb roughly 40% more calories from peanut butter than from actual peanuts (of the same calorical value). There are more reasons why counting calories isn't nearly as accurate a method as people tend to assume, but these two are really sufficient.
    - was8309 7y ago
      Isn't the low carb argument that for proteins more is passed and don't need to be burnt off, but for carbs almost all calories must be burnt off? How many calories do I take in and therefore must burn off thru exercise if I swallow a penny?
      - solveit 7y ago
        I think the low carb argument is that processed carbs mess with your blood sugar levels, making you hungrier, but the discourse around nutrition is messed up enough that there are many low carb arguments, some of them mutually contradictory. As for your penny, zero, unless I'm greatly mistaken, which is why pennies don't come with nutritional labels.
deleted 7y ago
[deleted]
trentnix 7y ago
Thinking in isolation and with pride ends in being an idiot. - GK Chesterton
- deehouie 7y ago
  Albert Einstein did much of his greatest work in isolation, and he was quite proud, too.
  - jaffau 7y ago
    He was also a racist, xenophobe, a theist and a bibliophobe.
  - killjoywashere 7y ago
    If you read Isaacson's biography, it's hard to come away without feeling like Einstein's insights were a product of his time, that he was in some sense no more a vessel than each of us, and that vessel was continuously exchanging contents with others: his father, the family's weekly dinner guest (a local student), the classmates he cribbed notes from, the professors who found him frustrating, the playboy he tutored (and learned to smoke cigars from), his wife, the patent applications on time-keeping devices he read as a Swiss patent clerk (and his train-time-keeping metaphor), his many collaborators (Lorenz perhaps most of all), the early conferences in Paris, etc. I am no Einstein, to be sure, but I do particularly recognize the experience he had as a teen, learning the math and engineering of his father from his father. His father and uncle, it's worth noting, built electric power generators. Mentally building an effective model of fields was surely something Einstein had to learn early, and perhaps without the math first.
  - dcow 7y ago
    And, yet, in 200 years he may well be regarded as an idiot.
    - username90 7y ago
      Why? Newton is still regarded as one of the greatest scientists ever. Note that he too did most of his work in isolation, and he too was extremely proud.
deehouie 7y ago
I think you're a bit burnt out from physics, thus this rather cynical view of physicists' approach to an important economic problem. The mathematical models you find in the works of many highly regarded economists are even more simplistic, more vulnerable to criticism. "When you have such hubris and make such simple mistakes..." that pronoun "you" should be the economists!
- zamfi 7y ago
  That economists make mistakes, and that even well-regarded economists espouse simplistic models, is not evidence that physicists might be any better at it.
- Mikeb85 7y ago
  Economic models are simplified in such a way to describe causality and relationships between variables but aren't actually expected to work 1:1 with real world numbers. That's why econometrics is a thing, that's why most economists nowadays are taught statistics, computer programming, advanced maths, etc... It's why there's a different process used to describe why things happen in a paper vs. predicting real world numbers.
killjoywashere 7y ago
My first exposure to really opportunity to contemplate economics, in even a qualitative sense, came with Dierdre McClosky's essay in the early days of "post-autistic" economics (1-3). Her observations about the flimsiness of economic modeling, verging on simply serving as a veil naked capitalism, struck me as the sort of informed cynicism I could hold onto. 17 years later, it's her disdain for economic models in comparison to physical models that sticks with me. (1-3): I honestly forget which of these it was, but the key term I search for is "mind-breakingly" https://www.deirdremccloskey.com/docs/paradigm.pdf https://www.deirdremccloskey.com/docs/paradigm.pdf http://www.deirdremccloskey.com/docs/pdf/Article_320.pdf http://www.deirdremccloskey.com/docs/pdf/Article_320.pdf https://www.deirdremccloskey.com/articles/stats/stats.php https://www.deirdremccloskey.com/articles/stats/stats.php
- gcbw3 7y ago
  I only skimmed the first two links, which have no citations, and read like a diatribe from someone who miss basic premisses in economy, sociology, anthropology (that are taught at a 101 class on those subjects) while making a grandiose case that people are not taught Statistics 101 before writing works based on statistic! It is full of opinion (e.g. the author has the opinion that free market solved gender equality and made the poor richer [1] p.18). Looks more like satire and internal jokes (trolling?) than an academic work.
dv_dt 7y ago
One of may favorite quotes about models is (paraphrased): All models are wrong, but some models are useful. I see it most often attributed to George Box, a statistician, but it's not completely clear he was the originator. In physics you have a luxury of verifying models at many empiric touchpoints via data collected in controlled or precisely measurable conditions. Comparatively in economics it's difficult to establish you have a useful model because the empiric data is difficult, and with unmeasurable aspects around human choices.

chewz 7y ago

> the poorer a person is the larger a percentage they are willing to risk Utility function is logaritmic.

duxut_staglatz 7y ago
Is there any evidence that it is?
- chewz 7y ago
  Pretty common assumption. [1] The need for money saturates slowly. Think about winning 1000 dollars (nice dinner pehaps), 10 000 (better car), 100 000 (larger appartment), .... , 10 000 000. At some point it doesn't matter if its 200 000 000 or 300 000 000. On the other hand a lotter ticket is 1$. What is the utility of 1$ - a can of coke pehaps. But the perspective of winning $1 000 000 - thats a nice idea to hold for a few days... So many people do despite the slim chances. [] https://economics.stackexchange.com/questions/23952/is-the-utility-of-money-actually-logarithmic https://economics.stackexchange.com/questions/23952/is-the-u... [] https://www.forbes.com/sites/rogerkay/2013/08/05/how-the-marginal-utility-of-money-balances-with-value/ https://www.forbes.com/sites/rogerkay/2013/08/05/how-the-mar...
  - duxut_staglatz 7y ago
    That's evidence for a concave utility function wrt income, not logarithmic per se. But your first link does cite evidence that _if_ utility is CRRA, we are not far from the case where utility is logarithmic

d0mine 7y ago

There is a crucial difference between physics and economic theories. Physics is a hard science. Physics works.

anovikov 7y ago

>he poorer a person is the larger a percentage they are willing to risk I don't agree with it. Poor people tend to be very risk-averse (they teach their kids to get "stable jobs" above everything else), and this puts them in a self-reciprocating loop of poverty. Many rich people who i know became so by repeatedly getting involved into "bold" things looked totally bullshit, and usually indeed was - apart from 1-2 in their lives that wasn't, and made them millions.

headsoup 7y ago

> the poorer a person is the larger a percentage they are willing to risk As a percentage, sure, but in real terms the poorer person doesn't have 'much' to lose (to be regained) over someone extremely rich risking the same percentage. The potential rewards are also likely to be immensely larger in percentage for the poor person too. But this is also relative risk against wealth in context. Comparing poor against poor there will still be comparable poor people with completely different risk profiles (basic example is one with children vs one without). The model I imagine must primarily establish reasonable/full context before determining any value factors.

vannevar 7y ago
As a percentage, sure, but in real terms the poorer person doesn't have 'much' to lose (to be regained) over someone extremely rich risking the same percentage. This is questionable. The assumption that a poor person can more easily regain their stake is shaky---a poor person who loses their money may become homeless, which could in turn make it harder for them to be employed, or if they are a trades person maybe they lose their tools or can no longer afford to rent them. By contrast, a rich person has access to credit lines and investors in their social network. For the poor who aren't wiped out below a critical threshold, then, it may be true, but you're not taking into account the significant number who drop below that threshold and may never recover. I would rephrase the original statement, "the poorer a person the larger percentage they are willing to risk" as "the poorer the person, the larger percentage they are forced to risk if they want to achieve comparable returns on a percentage basis."
- kortilla 7y ago
  Rich people do not have access to credit lines if they don’t have assets to back the loans. And their rich friends certainly aren’t going to invest in someone who just lost a ton of money.
  - vannevar 7y ago
    That's better than a poor person, who does not have access to reasonably priced credit even in the unlikely event they have the collateral. And in reality, the rich often do have access to unsecured credit. They have that credit because they've made money in the past, and even if their current fortunes have turned, creditors and investors will often continue to invest in them.

emmelaich 7y ago

It's analogous to weight-loss arguments. It is true that calories = calories-in - calories-out. It cannot not be true. It just isn't helpful.

hector_vasquez 7y ago
How are you defining a "calorie"? The number printed on the package? Because that number is basically meaningless.
- solveit 7y ago
  That number happens to be remarkably accurate. More accurate than required by law in fact. It also happens to accurately predict changes in a person's weight if you know everything they're eating.
  - V-2 7y ago
    While it certainly differs from country to country, FDA allows a discrepancy of 20%. That's significant. There have been studies that showed the labels to be off by 25%. And even if the numbers were accurate, they're still rule-of-thumbish, because human metabolism doesn't simply ingest all energy available in a food. For instance you'd absorb roughly 40% more calories from peanut butter than from actual peanuts (of the same calorical value). There are more reasons why counting calories isn't nearly as accurate a method as people tend to assume, but these two are really sufficient.
  - was8309 7y ago
    Isn't the low carb argument that for proteins more is passed and don't need to be burnt off, but for carbs almost all calories must be burnt off? How many calories do I take in and therefore must burn off thru exercise if I swallow a penny?
    - solveit 7y ago
      I think the low carb argument is that processed carbs mess with your blood sugar levels, making you hungrier, but the discourse around nutrition is messed up enough that there are many low carb arguments, some of them mutually contradictory. As for your penny, zero, unless I'm greatly mistaken, which is why pennies don't come with nutritional labels.

deleted 7y ago

[deleted]

trentnix 7y ago

Thinking in isolation and with pride ends in being an idiot. - GK Chesterton

deehouie 7y ago
Albert Einstein did much of his greatest work in isolation, and he was quite proud, too.
- jaffau 7y ago
  He was also a racist, xenophobe, a theist and a bibliophobe.
- killjoywashere 7y ago
  If you read Isaacson's biography, it's hard to come away without feeling like Einstein's insights were a product of his time, that he was in some sense no more a vessel than each of us, and that vessel was continuously exchanging contents with others: his father, the family's weekly dinner guest (a local student), the classmates he cribbed notes from, the professors who found him frustrating, the playboy he tutored (and learned to smoke cigars from), his wife, the patent applications on time-keeping devices he read as a Swiss patent clerk (and his train-time-keeping metaphor), his many collaborators (Lorenz perhaps most of all), the early conferences in Paris, etc. I am no Einstein, to be sure, but I do particularly recognize the experience he had as a teen, learning the math and engineering of his father from his father. His father and uncle, it's worth noting, built electric power generators. Mentally building an effective model of fields was surely something Einstein had to learn early, and perhaps without the math first.
- dcow 7y ago
  And, yet, in 200 years he may well be regarded as an idiot.
  - username90 7y ago
    Why? Newton is still regarded as one of the greatest scientists ever. Note that he too did most of his work in isolation, and he too was extremely proud.

deehouie 7y ago

I think you're a bit burnt out from physics, thus this rather cynical view of physicists' approach to an important economic problem. The mathematical models you find in the works of many highly regarded economists are even more simplistic, more vulnerable to criticism. "When you have such hubris and make such simple mistakes..." that pronoun "you" should be the economists!

zamfi 7y ago
That economists make mistakes, and that even well-regarded economists espouse simplistic models, is not evidence that physicists might be any better at it.
Mikeb85 7y ago
Economic models are simplified in such a way to describe causality and relationships between variables but aren't actually expected to work 1:1 with real world numbers. That's why econometrics is a thing, that's why most economists nowadays are taught statistics, computer programming, advanced maths, etc... It's why there's a different process used to describe why things happen in a paper vs. predicting real world numbers.

killjoywashere 7y ago

My first exposure to really opportunity to contemplate economics, in even a qualitative sense, came with Dierdre McClosky's essay in the early days of "post-autistic" economics (1-3). Her observations about the flimsiness of economic modeling, verging on simply serving as a veil naked capitalism, struck me as the sort of informed cynicism I could hold onto. 17 years later, it's her disdain for economic models in comparison to physical models that sticks with me. (1-3): I honestly forget which of these it was, but the key term I search for is "mind-breakingly" https://www.deirdremccloskey.com/docs/paradigm.pdf https://www.deirdremccloskey.com/docs/paradigm.pdf http://www.deirdremccloskey.com/docs/pdf/Article_320.pdf http://www.deirdremccloskey.com/docs/pdf/Article_320.pdf https://www.deirdremccloskey.com/articles/stats/stats.php https://www.deirdremccloskey.com/articles/stats/stats.php

gcbw3 7y ago
I only skimmed the first two links, which have no citations, and read like a diatribe from someone who miss basic premisses in economy, sociology, anthropology (that are taught at a 101 class on those subjects) while making a grandiose case that people are not taught Statistics 101 before writing works based on statistic! It is full of opinion (e.g. the author has the opinion that free market solved gender equality and made the poor richer [1] p.18). Looks more like satire and internal jokes (trolling?) than an academic work.

dv_dt 7y ago

One of may favorite quotes about models is (paraphrased): All models are wrong, but some models are useful. I see it most often attributed to George Box, a statistician, but it's not completely clear he was the originator. In physics you have a luxury of verifying models at many empiric touchpoints via data collected in controlled or precisely measurable conditions. Comparatively in economics it's difficult to establish you have a useful model because the empiric data is difficult, and with unmeasurable aspects around human choices.