4 ms·

They're not just useful concepts tho, they're how every business operates, and the concepts cover the vast majority of situations. The behavioral economics/Fre

by peder 3mo ago

They're not just useful concepts tho, they're how every business operates, and the concepts cover the vast majority of situations. The behavioral economics/Freakonomics thing was like "Hey, here's this thing that might if you squint real hard fall outside of efficient market theory" and then for a decade people took that to mean that that the base concepts were worthless, which was a severe overcorrection from people that didn't understand economics.

tsimionescu 3mo ago
The vast majority of real world businesses create prices based on cost plus systems, not on supply/demand, which are generally impossible to measure directly. Another good chunk of smaller businesses simply copy the prices of larger businesses, at least in b2c markets. Sure, if their goods are not selling, they might reduce price, but they might try other tactics as well (marketing, targeted discounts, etc).
- wrqvrwvq 3mo ago
  these "other tactics" are just attempts at increasing demand. Cost plus is how many business set prices but that is entirely separate from what the market decides. If cost plus is not an attractive price, it won't sell, because the demand is not there.
  - tsimionescu 3mo ago
    > If cost plus is not an attractive price, it won't sell, because the demand is not there. Sure, but that only sets a cap. The market might bear twice the initial price, but few businesses actually take the time in practice to explore things at this level
- BobaFloutist 3mo ago
  I always thought of supply and demand as more defining a limit that the price approaches as the number of transactions and the size of the market approach infinity, barring structural obstacles or persistent information asymmetry to prevent it than as something that was supposed to happen immediately on any given transaction.
- bryanlarsen 3mo ago
  Businesses generally follow the rule "price is set to whatever the market will bear". Which is just an indirect way of setting price by supply and demand.
dash2 3mo ago
There are many ways that free and competitive markets can fail other than behavioural economics! Monopoly, informational asymmetry, externalities… All of these are plausibly pervasive.
wrqvrwvq 3mo ago
Knowledge accumulation seems to have cyclical patterns where general observations are condensed into "laws", and common wisdom is to treat these as unassailable truths. As exceptions and contradictions are found, the popular wisdom is to entirely dismiss the overwhelming universal conformity with the earlier principles because it sounds smart to common people. A lot of normal people see the basic problems with most methodological maxims but are led to believe that the maxim is truth. It takes a podcaster with a "study" to then "debunk" the "myth" they were yesterday defending as unimpeachable. People are generally not well informed enough to know anything and the podcaster class is the worst imaginable vector for knowledge dissemination or popularization. Just clickbait garbage monkeys with foreign money and vicious antisocial tendencies.
WarmWash 3mo ago
Economics is one of the scientific sore spots for liberal ideology. If you are liberal and mostly swim in liberal circles, you probably believe that economics is mostly bunk pseudoscience. Akin to conservatives and climate change
- dinfinity 3mo ago
  To be fair, macroeconomics can hardly be called science, though. It is incredibly hard to falsify a lot of the theories given the lack of possibilities for experimentation. It is far closer to philosophy than to any of the even remotely hard sciences. Nothing to do with ideology, but with the nature of the field. Take epidemiological research in the areas of food and medicine: incredibly hard and expensive to get right and even then with often tenuous results. Now try doing that with ridiculously heterogeneous nations influenced by potentially almost everything on the planet. It's a small miracle that economists manage to get some useful insights out of the data, but we should definitely be aware of how weakly most of them are supported (don't start talking about "error bars" with economists).
  - WorldMaker 3mo ago
    An argument of the last couple of decades is that videogames have built incredible labs for macroeconomic experimentation. So far mostly what we learn are failure cases (mudflation, being such a big learning from videogames that the term itself is named after a type of them), but we are learning things (some of them exploitative, but that's a different ethical question).
    - dinfinity 3mo ago
      You are overstating this. Mudflation does not transfer to the real world well, if at all. Very few skill-capped bits of DLC for real world activities. These games do not include many of the complexities of the real world and can thus provide few insights that generalize to the real world on a macroeconomic level. They are toy universes. I'm not saying they are useless, far from it, but they are not "incredible labs for macroeconomic experimentation". Try determining the effect of raising the central bank interest rate within a game of your choice. Or changing the minimum wage. Or the effects of investing in education. Etc.
throwaway27448 3mo ago
Well yes, market forces as theorized are the very premise we've structured our entire economy around. Or, more bluntly, the desire to purely encapsulate political-economic power in capital. How else could an economic process operate without being attacked by the state? But this is also why our market behaves so irrationally—these concepts have very obvious predictive limits that investors are struggling to grapple with and our politicians (and largely our electorate tbf) have blind faith in

by peder 3mo ago

tsimionescu 3mo ago

The vast majority of real world businesses create prices based on cost plus systems, not on supply/demand, which are generally impossible to measure directly. Another good chunk of smaller businesses simply copy the prices of larger businesses, at least in b2c markets. Sure, if their goods are not selling, they might reduce price, but they might try other tactics as well (marketing, targeted discounts, etc).

wrqvrwvq 3mo ago
these "other tactics" are just attempts at increasing demand. Cost plus is how many business set prices but that is entirely separate from what the market decides. If cost plus is not an attractive price, it won't sell, because the demand is not there.
- tsimionescu 3mo ago
  > If cost plus is not an attractive price, it won't sell, because the demand is not there. Sure, but that only sets a cap. The market might bear twice the initial price, but few businesses actually take the time in practice to explore things at this level
BobaFloutist 3mo ago
I always thought of supply and demand as more defining a limit that the price approaches as the number of transactions and the size of the market approach infinity, barring structural obstacles or persistent information asymmetry to prevent it than as something that was supposed to happen immediately on any given transaction.
bryanlarsen 3mo ago
Businesses generally follow the rule "price is set to whatever the market will bear". Which is just an indirect way of setting price by supply and demand.

dash2 3mo ago

There are many ways that free and competitive markets can fail other than behavioural economics! Monopoly, informational asymmetry, externalities… All of these are plausibly pervasive.

wrqvrwvq 3mo ago

Knowledge accumulation seems to have cyclical patterns where general observations are condensed into "laws", and common wisdom is to treat these as unassailable truths. As exceptions and contradictions are found, the popular wisdom is to entirely dismiss the overwhelming universal conformity with the earlier principles because it sounds smart to common people. A lot of normal people see the basic problems with most methodological maxims but are led to believe that the maxim is truth. It takes a podcaster with a "study" to then "debunk" the "myth" they were yesterday defending as unimpeachable. People are generally not well informed enough to know anything and the podcaster class is the worst imaginable vector for knowledge dissemination or popularization. Just clickbait garbage monkeys with foreign money and vicious antisocial tendencies.

WarmWash 3mo ago

Economics is one of the scientific sore spots for liberal ideology. If you are liberal and mostly swim in liberal circles, you probably believe that economics is mostly bunk pseudoscience. Akin to conservatives and climate change

dinfinity 3mo ago
To be fair, macroeconomics can hardly be called science, though. It is incredibly hard to falsify a lot of the theories given the lack of possibilities for experimentation. It is far closer to philosophy than to any of the even remotely hard sciences. Nothing to do with ideology, but with the nature of the field. Take epidemiological research in the areas of food and medicine: incredibly hard and expensive to get right and even then with often tenuous results. Now try doing that with ridiculously heterogeneous nations influenced by potentially almost everything on the planet. It's a small miracle that economists manage to get some useful insights out of the data, but we should definitely be aware of how weakly most of them are supported (don't start talking about "error bars" with economists).
- WorldMaker 3mo ago
  An argument of the last couple of decades is that videogames have built incredible labs for macroeconomic experimentation. So far mostly what we learn are failure cases (mudflation, being such a big learning from videogames that the term itself is named after a type of them), but we are learning things (some of them exploitative, but that's a different ethical question).
  - dinfinity 3mo ago
    You are overstating this. Mudflation does not transfer to the real world well, if at all. Very few skill-capped bits of DLC for real world activities. These games do not include many of the complexities of the real world and can thus provide few insights that generalize to the real world on a macroeconomic level. They are toy universes. I'm not saying they are useless, far from it, but they are not "incredible labs for macroeconomic experimentation". Try determining the effect of raising the central bank interest rate within a game of your choice. Or changing the minimum wage. Or the effects of investing in education. Etc.

throwaway27448 3mo ago

Well yes, market forces as theorized are the very premise we've structured our entire economy around. Or, more bluntly, the desire to purely encapsulate political-economic power in capital. How else could an economic process operate without being attacked by the state? But this is also why our market behaves so irrationally—these concepts have very obvious predictive limits that investors are struggling to grapple with and our politicians (and largely our electorate tbf) have blind faith in