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I think you have missed what people are getting at with "humans are not rational". The argument behind Capitalism is that people will do what is in their self-i

I think you have missed what people are getting at with "humans are not rational". The argument behind Capitalism is that people will do what is in their self-interest, and more generally will be rational actors, and as such the outcome of the market will reflect what people want. However, people often act against their self-interest either naturally or because of manipulation, and short term self-interest can conflict with long term self-interest. A good example of this is "austerity" in hard economic times. When times are bad the reaction of many people is to "tighten their belts" and decrease spending, and in the short term that provides some protection against things like being laid off. However, if large numbers of people start doing this then the amount of economic activity is significantly reduced and those people who reduced their spending now risk being laid off.

onnoonno 12y ago
That might all be true. However, the question is not discussed in a vacuum. It is discussed in the context of policy, seemingly often used as a core premise. Thus the question remains: What kind of policy one exactly wants to base on 'human's irrationality'. And whether it is good to base policy on irrational behavior. It is also important to consider that there will always be people who are more rational in their profit/money/power-maximizing than others. A policy based upon irrational behavior might create an inefficiency that will be exploited by those with more rational behavior. That's why I am wary about lines of reasoning along 'people are just irrational'. I believe it creates system(s) of thought where somehow, we account for people's irrationality and thus make it more just/less cyclic/less prone to capital accumulation. Yet, those who simply, coolly maximize their own gains, those who sort ideas like 'complex, advanced policy informed by the irrational behavior of humans' into the religion bin etc. will still come out ahead. In other words: We generate complex systems of thoughts, especially in fields like economic policy. Rational actors will play with those systems, circumvent them, be creative, etc. To turn the argument around: Given that human's rational behavior is limited, is it a good idea to create complex policy that makes it even less likely for humans to understand it and act rational?
- Perdition 12y ago
  >Thus the question remains: What kind of policy one exactly wants to base on 'human's irrationality'. And whether it is good to base policy on irrational behavior. That isn't what people are saying. What people are saying is that Capitalism is predicated upon the notion that people are at least mostly rational actors who act in self-interest, and so a free market will give people what they want. The criticism of Capitalism is that humans are not mostly rational, and regularly don't act in self-interest, and this leads to large amounts of human suffering. People like Piketty aren't looking to eliminate the disparity between "irrational actors" and "rational actors"^, or to increase the amount of "rational" behaviour, but to eliminate the human suffering that Capitalism is supposed to eliminate if it worked as claimed. ^ Which is not a synonym for "wealthy". What Piketty is talking about is wealth accumulating to the point where the skilled and hard working don't have upward mobility. The hereditarily wealthy don't need to be particularly "rational actors", they just need to not spend their wealth faster than it accumulates. P.S. Even "rational actors" suffer losses caused by the irrationality of the market.
  - onnoonno 12y ago
    But is the wealth they inherited the problem - or rather the abuse of power that comes with it? If you agree that it is the abuse of power: Does this need additional complexity to address - or is it simply something to be addressed with (tax) laws? Also, I think that the idea of 'eliminating human suffering' is a sure sign of an ideology. Human suffering can be reduced, certainly, but 'elimination' is utopian, an unreachable extreme. For example, I would argue that a large property and luxury tax could alleviate most the problems that unwise wealth causes. Further down in this thread, the user 'StandardFuture' more eloquently says what I think am trying to say - people are people and they just game whatever system is in place. I think that in some sense, the idea of 'fixing the damn system' can actually be a trap. It may make one busy trying to think outside the box, to be busy inventing very advanced ideas for solving a problem that in the end boils down to 'people are people'.

onnoonno 12y ago

That might all be true. However, the question is not discussed in a vacuum. It is discussed in the context of policy, seemingly often used as a core premise. Thus the question remains: What kind of policy one exactly wants to base on 'human's irrationality'. And whether it is good to base policy on irrational behavior. It is also important to consider that there will always be people who are more rational in their profit/money/power-maximizing than others. A policy based upon irrational behavior might create an inefficiency that will be exploited by those with more rational behavior. That's why I am wary about lines of reasoning along 'people are just irrational'. I believe it creates system(s) of thought where somehow, we account for people's irrationality and thus make it more just/less cyclic/less prone to capital accumulation. Yet, those who simply, coolly maximize their own gains, those who sort ideas like 'complex, advanced policy informed by the irrational behavior of humans' into the religion bin etc. will still come out ahead. In other words: We generate complex systems of thoughts, especially in fields like economic policy. Rational actors will play with those systems, circumvent them, be creative, etc. To turn the argument around: Given that human's rational behavior is limited, is it a good idea to create complex policy that makes it even less likely for humans to understand it and act rational?

Perdition 12y ago
>Thus the question remains: What kind of policy one exactly wants to base on 'human's irrationality'. And whether it is good to base policy on irrational behavior. That isn't what people are saying. What people are saying is that Capitalism is predicated upon the notion that people are at least mostly rational actors who act in self-interest, and so a free market will give people what they want. The criticism of Capitalism is that humans are not mostly rational, and regularly don't act in self-interest, and this leads to large amounts of human suffering. People like Piketty aren't looking to eliminate the disparity between "irrational actors" and "rational actors"^, or to increase the amount of "rational" behaviour, but to eliminate the human suffering that Capitalism is supposed to eliminate if it worked as claimed. ^ Which is not a synonym for "wealthy". What Piketty is talking about is wealth accumulating to the point where the skilled and hard working don't have upward mobility. The hereditarily wealthy don't need to be particularly "rational actors", they just need to not spend their wealth faster than it accumulates. P.S. Even "rational actors" suffer losses caused by the irrationality of the market.
- onnoonno 12y ago
  But is the wealth they inherited the problem - or rather the abuse of power that comes with it? If you agree that it is the abuse of power: Does this need additional complexity to address - or is it simply something to be addressed with (tax) laws? Also, I think that the idea of 'eliminating human suffering' is a sure sign of an ideology. Human suffering can be reduced, certainly, but 'elimination' is utopian, an unreachable extreme. For example, I would argue that a large property and luxury tax could alleviate most the problems that unwise wealth causes. Further down in this thread, the user 'StandardFuture' more eloquently says what I think am trying to say - people are people and they just game whatever system is in place. I think that in some sense, the idea of 'fixing the damn system' can actually be a trap. It may make one busy trying to think outside the box, to be busy inventing very advanced ideas for solving a problem that in the end boils down to 'people are people'.