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"Rational agents" in the context of economics does not mean people make the best choices for maximizing capital preservation. It means that human behavior is in
by dreamdu5t 15y ago
"Rational agents" in the context of economics does not mean people make the best choices for maximizing capital preservation. It means that human behavior is inherently rational because only an individual knows if his choices were in his best interest.
- tbrownaw 15y agoSo it's basically meaningless?
- dreamdu5t 15y agoThe way it's typically used today is meaningless. It came from economists asserting the difference between modeling human behavior vs. the behavior of physical objects. In that sense it is not meaningless. It's an important distinction that in order to model human behavior, we have to accept that people's goals are myriad and constantly shifting, and that we can only come to know their goals or preferences by them being revealed in action.
- pixcavator 15y ago>"economists asserting the difference between modeling human behavior vs. the behavior of physical objects" Is it really that different? Try to attach an object to several springs and see if it behaves "rationally".
- dreamdu5t 15y agoIt is very different. Physical objects do not have free will. They don't act towards goals. They conform to unchanging mathematical patterns. Humans do not. What I do today cannot be accurately used to determine what I will do tomorrow.
- _delirium 15y agoAh, but that's assuming something very much in debate. Humans are actually quite predictable in many ways, though not as well as springs (currently). Aggregate behavior can often be predicted to reasonable accuracy, at least as well as with other complex, non-human systems like the weather. And even individual behavior can be predicted with enough information (and neuroscientists can even predict some specific decisions seconds in advance, given the right instrumentation). Just knowing some demographic and contextual information about a person hugely reduces your error on predicting what their "choices" will be.
- dreamdu5t 15y agoIt's a little different because the weatherman isn't forcing his predictions on you. The debate takes on a different dimension when you're talking about political policy, when the weatherman passes a law forcing everyone to wear raincoats on days of high chances of precipitation.
- balinvadasz 15y agoI disagree completely. What about all inherent biases which make humans do things not in their best interest (they just think it is in their best interest, but many times they don't think, they panic) ? See: - Loss aversion http://en.wikipedia.org/wiki/Loss_aversion http://en.wikipedia.org/wiki/Loss_aversion - Sunk cost effects: http://en.wikipedia.org/wiki/Sunk_cost http://en.wikipedia.org/wiki/Sunk_cost - Status quo bias: http://en.wikipedia.org/wiki/Status_quo_bias http://en.wikipedia.org/wiki/Status_quo_bias
- nasmorn 15y agoAs a trained economist I can attest to the fact that most micro economist view these issues you raised as basically irrelevant. I understand that it is basically damning experimental evidence but it is completely disregarded.
- _delirium 15y agoI'm not very up on microeconomics, but isn't behavioral economics a hot field currently? Or are they still seen as outside the mainstream?
- dreamdu5t 15y agoThe problem is those bias' can only be revealed through action. No matter what you assert somebody's preference is, the preference is only revealed through action. You can say me going to football games is not in my best interest, but the fact that I act by going to a football game demonstrates that it is.
- _delirium 15y agoThis requires asserting as an axiom that people never make mistakes or get tricked, though, are always aware of all relevant information, and are in possession of an accurate mental model of how their actions are likely to affect themselves and the world. I mean, you can't really infer that someone's preference was to fall off a cliff by the mere fact that they did fall off it; they might not have realized that the cliff was there, among other possibilities.
- leot 15y agoCapitalism forces people to try to be rational. To claim that humans are inherently rational is to deny the widespread existence of psychological pathologies.