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>> I'll add one of my biggest stressors - opaque pricing. Economic "models" make assumptions like markets being efficient. Meanwhile in the business classes ne

>> I'll add one of my biggest stressors - opaque pricing. Economic "models" make assumptions like markets being efficient. Meanwhile in the business classes next door they teach how to avoid competition because it's a race to the bottom. They all learn the prisoners dilemma as an example because it's how you need to think to avoid overt collusion. I'd like an economic model as powerful as the laws of thermodynamics, where everything is included if not explicitly. But I haven't seen one.

JumpCrisscross 2y ago
> Economic "models" make assumptions like markets being efficient No? You’re thinking of a specific class of models. Generally speaking, prescriptive economics is about characterising what an efficient market would look like and then identifying why reality is not that. (And whether that deviance is good or bad.) This article could be seen doing that. It seems like domains should be closed to $2, given an efficient market. But they’re nine going on twelve.
- pydry 2y ago
  Most of the assumptions made in economic models conceal sources of profit. They dont appear to be there to simplify complexity because they simulate situations that have never and will never be approximated (never been perfect competition or information, never will be). It's unlike, say, physics in this respect.
  - JumpCrisscross 2y ago
    > Most of the assumptions made in economic models conceal sources of profit This is wildly inaccurate. A huge amount of economics is focussed on profit. For obvious reasons. > never been perfect competition or information, never will be Frictionless surfaces are mostly a fiction, too. That doesn’t mean calculating the expected outcome in a frictionless condition is useless. If the deviance is more than you’d expect from friction, that’s informative. Unlike physics, a lot of people think their undergrad 101 course plus skimming the Economist an economist themselves makes. It’s a common hubris, albeit one unusually common in tech. (Disclaimer: I’m not an economist. But I know the boundaries of my circle of competence in this.)
    - pydry 2y ago
      >This is wildly inaccurate. A huge amount of economics is focussed on profit. For obvious reasons. As an example there are countless studies looking at the relationship between the minimum wage and employment and off the top of my head I can think of maybe 2 off the top of my head that measure the relationship between the minimum wage and profit. For obvious reasons. The same reasons. It's not a great way to get ahead in your scientific profession to point out things which make the people with the money and the power uncomfortable - Galileo discovered that one.
specialist 2y ago
Yup. > Economic "models" make assumptions like markets being efficient. Open markets require rules and referees. Freedom Markets™ advocates eliminate rules and refs. Because "regulations discourages free enterprise". The final result are closed markets. "free market" is doublespeak for winner-takes-all, anti-competition, pro-monopolies, plantation class, and neoliberalism.
chaorace 2y ago
> Economic "models" make assumptions like markets being efficient. Meanwhile in the business classes next door they teach how to avoid competition because it's a race to the bottom You've more-or-less verbatim described the impetus behind the modern development of behavioral economics. That older sort of classical theory which you describe -- the one which frames the world in terms of "rational economic agents" -- has been out of vogue for nearly two decades now. Sure, you can still find the idea taught in classes... but professors now treat the classical ideas more like a simplified foundation rather than gospel -- much like a physics professor teaches Newtonian Physics before moving on to Relativity. > I'd like an economic model as powerful as the laws of thermodynamics, where everything is included if not explicitly. But I haven't seen one. ... and this is where you diverge in thinking from the new-school behavioral economists. According to the new-school, economics is a social science, a thing of statistical measurements and probabilities. Most modern economists would probably be inclined to chide you and say that attempting to characterize economics in terms of hard laws would be the same as disregarding the human element -- a reversion to the classical idea of "rational economic agents".
- TSP00N3 2y ago
  Good read (or in my case listen on Audible) on behavioral economics: https://en.m.wikipedia.org/wiki/Misbehaving:_The_Making_of_Behavioral_Economics https://en.m.wikipedia.org/wiki/Misbehaving:_The_Making_of_B...
- ghaff 2y ago
  Somewhat. Some of the science behind behavioral economics relates to the fact that there are actually rationales behind certain preferences that aren't strictly about expected value. The utility of money is not a linear function. Etc. People also don't understand statistics well as a whole, to be sure. But behavioral economics is also not purely about people being irrational.
Terr_ 2y ago
Yeah, "the free market" tends to have cheerleaders with contradictory premises for how it will work. For example: 1. "With perfect price/deal information, this math shows economic actors will be super duper efficient." 2. "Since people have the freedom to make secret deals for hidden prices, this prevents cartels by allowing defection." Unfortunately it feels like rather than addressing the contradiction, they prefer to quietly march under the same banner and in the end we get neither benefit.
mr_toad 2y ago
> Economic "models" make assumptions like markets being efficient. There’s probably more ink devoted to the study of market failures in economic literature than perfect markets. Nobody is getting tenure by developing models of perfect markets.

JumpCrisscross 2y ago

> Economic "models" make assumptions like markets being efficient No? You’re thinking of a specific class of models. Generally speaking, prescriptive economics is about characterising what an efficient market would look like and then identifying why reality is not that. (And whether that deviance is good or bad.) This article could be seen doing that. It seems like domains should be closed to $2, given an efficient market. But they’re nine going on twelve.

pydry 2y ago
Most of the assumptions made in economic models conceal sources of profit. They dont appear to be there to simplify complexity because they simulate situations that have never and will never be approximated (never been perfect competition or information, never will be). It's unlike, say, physics in this respect.
- JumpCrisscross 2y ago
  > Most of the assumptions made in economic models conceal sources of profit This is wildly inaccurate. A huge amount of economics is focussed on profit. For obvious reasons. > never been perfect competition or information, never will be Frictionless surfaces are mostly a fiction, too. That doesn’t mean calculating the expected outcome in a frictionless condition is useless. If the deviance is more than you’d expect from friction, that’s informative. Unlike physics, a lot of people think their undergrad 101 course plus skimming the Economist an economist themselves makes. It’s a common hubris, albeit one unusually common in tech. (Disclaimer: I’m not an economist. But I know the boundaries of my circle of competence in this.)
  - pydry 2y ago
    >This is wildly inaccurate. A huge amount of economics is focussed on profit. For obvious reasons. As an example there are countless studies looking at the relationship between the minimum wage and employment and off the top of my head I can think of maybe 2 off the top of my head that measure the relationship between the minimum wage and profit. For obvious reasons. The same reasons. It's not a great way to get ahead in your scientific profession to point out things which make the people with the money and the power uncomfortable - Galileo discovered that one.

specialist 2y ago

Yup. > Economic "models" make assumptions like markets being efficient. Open markets require rules and referees. Freedom Markets™ advocates eliminate rules and refs. Because "regulations discourages free enterprise". The final result are closed markets. "free market" is doublespeak for winner-takes-all, anti-competition, pro-monopolies, plantation class, and neoliberalism.

chaorace 2y ago

> Economic "models" make assumptions like markets being efficient. Meanwhile in the business classes next door they teach how to avoid competition because it's a race to the bottom You've more-or-less verbatim described the impetus behind the modern development of behavioral economics. That older sort of classical theory which you describe -- the one which frames the world in terms of "rational economic agents" -- has been out of vogue for nearly two decades now. Sure, you can still find the idea taught in classes... but professors now treat the classical ideas more like a simplified foundation rather than gospel -- much like a physics professor teaches Newtonian Physics before moving on to Relativity. > I'd like an economic model as powerful as the laws of thermodynamics, where everything is included if not explicitly. But I haven't seen one. ... and this is where you diverge in thinking from the new-school behavioral economists. According to the new-school, economics is a social science, a thing of statistical measurements and probabilities. Most modern economists would probably be inclined to chide you and say that attempting to characterize economics in terms of hard laws would be the same as disregarding the human element -- a reversion to the classical idea of "rational economic agents".

TSP00N3 2y ago
Good read (or in my case listen on Audible) on behavioral economics: https://en.m.wikipedia.org/wiki/Misbehaving:_The_Making_of_Behavioral_Economics https://en.m.wikipedia.org/wiki/Misbehaving:_The_Making_of_B...
ghaff 2y ago
Somewhat. Some of the science behind behavioral economics relates to the fact that there are actually rationales behind certain preferences that aren't strictly about expected value. The utility of money is not a linear function. Etc. People also don't understand statistics well as a whole, to be sure. But behavioral economics is also not purely about people being irrational.

Terr_ 2y ago

Yeah, "the free market" tends to have cheerleaders with contradictory premises for how it will work. For example: 1. "With perfect price/deal information, this math shows economic actors will be super duper efficient." 2. "Since people have the freedom to make secret deals for hidden prices, this prevents cartels by allowing defection." Unfortunately it feels like rather than addressing the contradiction, they prefer to quietly march under the same banner and in the end we get neither benefit.

mr_toad 2y ago

> Economic "models" make assumptions like markets being efficient. There’s probably more ink devoted to the study of market failures in economic literature than perfect markets. Nobody is getting tenure by developing models of perfect markets.