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> Economists discount any factors that would not influence the thinking of a rational person. These things are supposedly irrelevant. I realize this is the set

by baddox 12y ago

> Economists discount any factors that would not influence the thinking of a rational person. These things are supposedly irrelevant. I realize this is the setup for No True Scotsman, but are there any "serious" economists who actually believe the things this article criticizes? I hear these criticisms a lot, and I'm sure there are plenty of people who appeal to these simplifications to support a particular political belief, but from what I have read of modern economics (including some heterodox schools), economists don't operate under these assumptions. The criticisms get more bizarre throughout the article: > Economists create this problem with their insistence on studying mythical creatures often known as Homo economicus. ... An Econ would not expect a gift on the day of the year in which she happened to get married, or be born. That example doesn't even make sense in the context of the Homo economicus criticisms. A perfectly rational person who is aware of the custom of giving gifts for important anniversaries absolutely would expect a gift on those days. They'd probably give gifts as well. There's nothing irrational about that.

dragonwriter 12y ago
> Economists discount any factors that would not influence the thinking of a rational person. This is meaningless. Insofar as many models in economics are based on the rational choice model, the definition of a rational actor is one who acts to maximize their experienced utility with perfect knowledge of how their actions will affect their experience utility. Anything that will affect a persons happiness would affect the decisions of a rational actor. Now, its true that, even so, reality is known not to comply with the rational actor model, but this article misses most of them and attacks a giant strawman. And I wonder why, because as a professor of economics, the author has to know that, its not plausibly a mistake of ignorance.
- baddox 12y ago
  To be fair, the author does say that modern economists don't claim to believe the simplistic Homo economicus model: > Of course, most economists know that the people with whom they interact do not resemble Econs. In fact, in private moments, economists are often happy to admit that most of the people they know are clueless about economic matters. But for decades, this realization did not affect the way most economists did their work. They had a justification: markets. To defenders of economics orthodoxy, markets are thought to have magic powers. But I think this criticism is invalid as well, based on what I have read of economics. It seems like few economists believe markets solve all societal problems, even among the notoriously pro-market schools, like Chicago and the very heterodox Austrian.
  - coldtea 12y ago
    >But I think this criticism is invalid as well, based on what I have read of economics. It seems like few economists believe markets solve all societal problems, even among the notoriously pro-market schools, like Chicago and the very heterodox Austrian. They might not think they solve "all societal problems" but they still think they solve too many of them. Plus, if you take away those crude models, most of the edifice of modern economics crumbles, and what's left is a dismal science that's no more scientific than astrology.
coldtea 12y ago
>I realize this is the setup for No True Scotsman, but are there any "serious" economists who actually believe the things this article criticizes? Believe them maybe not, and in their more theoritical papers and private company, they would admit not believing those. But the effective guidance they give to governments, and their arguments in policy issues, are all taken from crude models like those. And those are also the same models preached by economists to the general public, and which inform the way the people think about economics.
wodenokoto 12y ago
almost all economic theories are based on the rational model, although many have incorporated some ideas from behavioral economic. For example, the reason why many countries tax income in brackets, with increasing percentage is the realization that a dollar is not worth the same as a dollar. Which stated this way, seems quite irrational. But if you have $0 then $10 is probably a big deal. If you have $100,0000 it probably isn't. So the pain incurred by taking more if the top is smaller, then taking less of the bottom. Giving gifts is a destruction of value. Rarely can the gift giver buy a thing of same utility as the gift receiver could for the same money (given both are econs). Therefore the whole gift giving society is irrational.
- sukilot 12y ago
  Forging social bonds is rational. Sentimental value makes gifts valuable -- if the recipient wants the gift. My mother doesn't want my cash, she wants my affection.
  - wodenokoto 12y ago
    Yes, of course. But that is not part of the rational model. The rational model is much, much simpler, which is why it is inadequate. Which is the whole point of the article. According to the rational model, the best you can ever hope to do is give your mother a gift of utility X, but most likely you will give her one of less than X. Your mother being rational can always choose to buy the thing with the most utility to her and therefore it is better to give her cash. All the other things you are adding are part of what is called behavioural economics. That doesn't mean they are irrational, or even not rational. But in economic theory, it is fairly new addition, and it is not incorporated throughout economic theory. But the nomenclature stays.
bcoates 12y ago
There's a tradition where behavior economists first come up with an esoteric model of rationality that would require people to do things that defeat their self interest, then perform experiments to see if subjects do them or not. This guarantees them publishable results: either you get "humans not rational!" or "rational behavior leads to bad result!" no matter what the subjects do. My experience is like yours: I've read a decent amount of economics stuff, and nothing that didn't have an axe to grind about the subject of rational actors itself ever proposes the kind of broken rationality models that the pop behavior economics stuff claims every economist believes.

by baddox 12y ago

dragonwriter 12y ago

> Economists discount any factors that would not influence the thinking of a rational person. This is meaningless. Insofar as many models in economics are based on the rational choice model, the definition of a rational actor is one who acts to maximize their experienced utility with perfect knowledge of how their actions will affect their experience utility. Anything that will affect a persons happiness would affect the decisions of a rational actor. Now, its true that, even so, reality is known not to comply with the rational actor model, but this article misses most of them and attacks a giant strawman. And I wonder why, because as a professor of economics, the author has to know that, its not plausibly a mistake of ignorance.

baddox 12y ago
To be fair, the author does say that modern economists don't claim to believe the simplistic Homo economicus model: > Of course, most economists know that the people with whom they interact do not resemble Econs. In fact, in private moments, economists are often happy to admit that most of the people they know are clueless about economic matters. But for decades, this realization did not affect the way most economists did their work. They had a justification: markets. To defenders of economics orthodoxy, markets are thought to have magic powers. But I think this criticism is invalid as well, based on what I have read of economics. It seems like few economists believe markets solve all societal problems, even among the notoriously pro-market schools, like Chicago and the very heterodox Austrian.
- coldtea 12y ago
  >But I think this criticism is invalid as well, based on what I have read of economics. It seems like few economists believe markets solve all societal problems, even among the notoriously pro-market schools, like Chicago and the very heterodox Austrian. They might not think they solve "all societal problems" but they still think they solve too many of them. Plus, if you take away those crude models, most of the edifice of modern economics crumbles, and what's left is a dismal science that's no more scientific than astrology.

coldtea 12y ago

>I realize this is the setup for No True Scotsman, but are there any "serious" economists who actually believe the things this article criticizes? Believe them maybe not, and in their more theoritical papers and private company, they would admit not believing those. But the effective guidance they give to governments, and their arguments in policy issues, are all taken from crude models like those. And those are also the same models preached by economists to the general public, and which inform the way the people think about economics.

wodenokoto 12y ago

almost all economic theories are based on the rational model, although many have incorporated some ideas from behavioral economic. For example, the reason why many countries tax income in brackets, with increasing percentage is the realization that a dollar is not worth the same as a dollar. Which stated this way, seems quite irrational. But if you have $0 then $10 is probably a big deal. If you have $100,0000 it probably isn't. So the pain incurred by taking more if the top is smaller, then taking less of the bottom. Giving gifts is a destruction of value. Rarely can the gift giver buy a thing of same utility as the gift receiver could for the same money (given both are econs). Therefore the whole gift giving society is irrational.

sukilot 12y ago
Forging social bonds is rational. Sentimental value makes gifts valuable -- if the recipient wants the gift. My mother doesn't want my cash, she wants my affection.
- wodenokoto 12y ago
  Yes, of course. But that is not part of the rational model. The rational model is much, much simpler, which is why it is inadequate. Which is the whole point of the article. According to the rational model, the best you can ever hope to do is give your mother a gift of utility X, but most likely you will give her one of less than X. Your mother being rational can always choose to buy the thing with the most utility to her and therefore it is better to give her cash. All the other things you are adding are part of what is called behavioural economics. That doesn't mean they are irrational, or even not rational. But in economic theory, it is fairly new addition, and it is not incorporated throughout economic theory. But the nomenclature stays.

bcoates 12y ago

There's a tradition where behavior economists first come up with an esoteric model of rationality that would require people to do things that defeat their self interest, then perform experiments to see if subjects do them or not. This guarantees them publishable results: either you get "humans not rational!" or "rational behavior leads to bad result!" no matter what the subjects do. My experience is like yours: I've read a decent amount of economics stuff, and nothing that didn't have an axe to grind about the subject of rational actors itself ever proposes the kind of broken rationality models that the pop behavior economics stuff claims every economist believes.