05-08-2016 12:09 PM
#76
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05-08-2016 12:25 PM
#77
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05-08-2016 12:47 PM
#78
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As far as I can tell, what he did was help change modelling for how utility is maximized. For example he showed holes in the expected utility hypothesis, which says that the value of a choice is the statistical expectation of the valuations of the outcome of the relevant choices. This doesn't suggest utility isn't maximized, but that valuation is assessed differently than earlier models suggest. |
Last edited by wufwugy; 05-08-2016 at 12:55 PM. | |
05-08-2016 01:23 PM
#79
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This seems like a naive interpretation of my question, presupposing that everyone who commits suicide thinks it's for the best. | |
05-08-2016 03:38 PM
#80
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Why would somebody commit suicide except that they think it's for the best? If I remember the history right, one of the breakthroughs in rationality came when Gary Becker (also a Nobel winner) began applying the concept in unorthodox ways. A popular example is heroin addiction. Despite all the drawbacks of shooting up again, if an addict decided to shoot up again, he still acted in such a way that reflects what he wanted the most. Even though it was unwise and even if his decision was influenced by other factors, he still shot up the heroin because he wanted to do so more than he wanted to not do so. |
Last edited by wufwugy; 05-08-2016 at 03:40 PM. | |
05-08-2016 06:38 PM
#81
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05-09-2016 11:54 AM
#82
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05-09-2016 12:06 PM
#83
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Wuf -- I think you're generally right that people make decisions that they think are right at that particular moment. But that doesn't mean that they are acting rationally, objectively speaking. | |
05-09-2016 02:06 PM
#84
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In the context of economic self-interest, rationality =! reason. |
Last edited by wufwugy; 05-09-2016 at 02:09 PM. | |
05-09-2016 02:22 PM
#85
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Well crap, that definition is so vague that it practically loses all meaning. From http://www.merriam-webster.com/dictionary/rational: | |
05-09-2016 02:24 PM
#86
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So irrationality can't exist within an economic model? It assumes that anything anyone does, regardless of how crazy, stupid, or self-destructive, is rational? I don't see how any model that's based on such a flimsy premise could work. | |
05-09-2016 03:14 PM
#87
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A model isn't meant to be reality it's meant to be a model. How well that model works dictates its use. As far as I'm aware (not very) economic models are incredibly simple in their scope when compared to what you'd expect if a model were to predict reality. |
Last edited by Savy; 05-09-2016 at 03:17 PM. | |
05-09-2016 03:19 PM
#88
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Many models are created to be testable; the economic view of rationality is not about justifying models. Rational behavior is a base assumption that allows the field to make sense. Things are no different in other sciences, where they require base assumptions to allow the science to have meaning. |
Last edited by wufwugy; 05-09-2016 at 03:28 PM. | |
05-09-2016 03:37 PM
#89
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I think what happens is probably that "crazy, stupid, and self-destructive" behavior is really hard to model, so economists tend to understand it little. I've seen it said that after economists learn about all the straight forward behavior stuff that makes sense, then they learn about the stuff that seems less sensible. But really I can't say specifically. Economists certainly try to model all behavior related to production and consumption of goods and services, but a lot of them don't think much of the psychology stuff brought by famous "irrationalist" people like Dan Ariely contributes much. |
05-09-2016 04:46 PM
#90
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They didn't change the meaning, they eliminated it. Based on your definition, when an economist says, "Agents act rationally", they might as well just say "Agents act." Their intended meaning is the same thing in both statements. Because from what you're saying, it doesn't matter what a person's reasons are -- all that matters is that they did something. | |
05-09-2016 05:26 PM
#91
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I added the bolded. That's where the assumption of rationality comes from. Economists say that when people do things, they have rationale for doing them. They assume this rationale is a conscious/subconscious valuation of net benefit, which is another way of saying that which is most desired. They claim desire is adequate since costs and benefits really just boil down to desire. When you're buying a burger for $5, really what you're saying is that you desire that burger more than any other $5 item, $5 of work, or the next best option (like $6 tacos or instead eating nothing and dieting like you had been thinking about). |
05-09-2016 05:32 PM
#92
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This is fascinating and I'm really glad that NightGizmo is making these observations. I'm curious to follow what wuf's reply is. | |
05-09-2016 06:18 PM
#93
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It should also be noted that economists aren't uniform on the topic. An example is that some economists never discuss behavior as if it's irrational and some often do. This just makes it all extra confusing. A lot of economists don't take the logic as far as I've presented here (but still some do), and this is a big part of why the stuff doesn't make sense. |
Last edited by wufwugy; 05-09-2016 at 06:50 PM. | |
05-09-2016 08:27 PM
#94
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But economists don't care about the actual reasons, right? Which strips the term "rational" of any meaning. Especially since you claim that in economics, all behavior is by definition rational. | |
05-09-2016 09:17 PM
#95
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05-09-2016 09:20 PM
#96
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Because, frankly, if the theory of economics starts with, "People are batshit crazy and random, but we need to figure out how to be more awesome in this morass while being also batshit crazy and random." then I can at least agree with the first principles. | |
05-09-2016 09:32 PM
#97
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The economics framework is that people act based on value assessments, regardless of what they are. They call this rational. This view has meaning because then if you can model value assessments, you can model behavior, or something to that effect. |
Last edited by wufwugy; 05-09-2016 at 09:53 PM. | |
05-09-2016 09:50 PM
#98
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The assumption is that actions come from preferences. Maybe somebody can have batshit crazy or random preferences, but the claim of rationality is that it's the preference being acted upon. |
05-10-2016 01:03 AM
#99
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There is even more confusion since practitioners use the terms only within subsets of goods and services. However, this is inadequate philosophically. They do things like find utility by contrasting payments for types of goods and services. But this doesn't mean that utility exists for only paid for goods and services. Utility is necessarily something in all decisions. Yet when practice is this narrow idea of utility and rationality, it opens the door for people to counter the concepts by calling them inadequate. |
05-10-2016 08:31 PM
#100
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Objectivism also believes that people act based on their set of values. But I believe that it differs from the economic framework in that value systems can be deemed irrational if they are poorly formed. Or, at the very least, the actions resulting from a poorly formed value system is irrational. | |
05-10-2016 09:41 PM
#101
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I just found this: |
05-10-2016 11:02 PM
#102
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So rational actor = not a literal puppet? | |
05-10-2016 11:17 PM
#103
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We're saying that people are preferential actors and that it is rational to be preferential. In a sense, this is the most basic type of rationality. It's not a thoroughly thoughtful abstraction, but it certainly makes sense that when the options are (1) act on preference, (2) do not act on preference, or (3) act or do not act on preference randomly, then (1) is the most rational. |
05-12-2016 07:04 AM
#104
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Free markets in a nutshell: individuals know better what's good for society than experts and collective wisdom. | |
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05-12-2016 02:54 PM
#105
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05-12-2016 03:17 PM
#106
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Well, that's just like, your opinion. Man. | |
05-12-2016 06:31 PM
#107
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It's more like this: one of the most foundational theories of economics -- rational choice theory -- says that aggregate social behavior results from the behavior of individual actors. |
Last edited by wufwugy; 05-12-2016 at 09:45 PM. | |
05-12-2016 08:26 PM
#108
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Free markets tap the ingenuity and expertise of societies in a far more effective and efficient way than any state ever has. It doesn't take much observation of the political system to prove this; to rise in the public sector usually has very little to do with being an expert at anything other than at gaming the political system itself. | |
05-12-2016 09:45 PM
#109
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Over 10k posts in this "What is something we underappreciate" thread, and notice how every example is something that would not exist except for the efforts of free enterprise. |
05-13-2016 01:19 AM
#110
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05-13-2016 07:50 AM
#111
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05-13-2016 07:55 AM
#112
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Each individual most likely knows best what his goals are, my point is he often doesn't know how to get there. Also, I'm not convinced that setting "policies" (whether through regulations or dynamically through free markets) for each individual based on their unique preferences is better for the society as a whole than setting them with collective goals in mind. Free market may be more effective, but it doesn't ensure movement in the right direction, collectively speaking. | |
Last edited by CoccoBill; 05-13-2016 at 07:58 AM.
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05-13-2016 01:06 PM
#113
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05-13-2016 02:30 PM
#114
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I typed this at the end after having made the post, but moved it to the front: |
05-13-2016 02:31 PM
#115
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05-13-2016 03:17 PM
#116
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I'd really appreciate it if you walk through this more slowly. | |
05-13-2016 03:55 PM
#117
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In the third video of the OP, Yaron Brook made a comment that implied he doesn't think FDIC deposit insurance should exist. Do you believe that basic banking regulations shouldn't exist and that consumer deposits shouldn't be protected? So if a bank is mismanaged (either due to incompetence or outright corruption) and fails so completely that they cannot pay back any deposits, that the consumer is SOL and loses all of their money? | |
05-13-2016 04:28 PM
#118
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I know you did not want to read a long essay, so stopped when the post was much smaller. But as I was rereading your post to make sure I addressed your points, it more than doubled in size. |
05-13-2016 04:57 PM
#119
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I agree with him. FDIC is a fantastic example of moral hazard and unintended consequences. It incentivizes risk-taking because the government mandates bailouts. This is the exact thing that constructed the subprime housing crisis. The government had several laws on the books and institutions working (Fannie and Freddie, Community Reinvestment Act, and many others) that incentivized riskier and riskier loans. The behavior of lenders and investment banks was a symptom of this. |
05-14-2016 11:11 AM
#120
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The brain exists in a pristine environment. If you were to skin your thumb right now, just nick off a bit deep enough, you would not gush out blood. It would pool because your circulatory system, which moves blood through your body, at the furthest reaches merely seeps it through openings into the blood-sponge of your hand. Outside of your arteries, you're a pool of blood. There's a distinct difference when it comes a certain organ - your brain. Blood does not leak from capillaries into the brain, there's a secure border called the Blood Brain Barrier that filters only select elements to enter the august space of brainmatter. | |
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05-14-2016 11:21 AM
#121
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05-14-2016 11:57 AM
#122
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That's a fine analogy but the post I was replying to was implying that the state consists of experts and collective wisdom, which it just does not. | |
05-14-2016 06:11 PM
#123
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05-14-2016 07:07 PM
#124
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The reasoning behind the belief would be something along the lines of "this is the only type of free market that has been observed to flourish." Which is true. We just don't know what a completely free society would be like because it has never happened. My point was merely that it is possible to be a socialist and be aware of basic economics at the same time, and to reconcile those two things. It's incredibly rare that this happens, but in theory it is possible to happen. I suspect if all socialists were to take some econ courses, 95% of them would reject socialist theory. | |
05-19-2016 04:41 PM
#125
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05-19-2016 04:54 PM
#126
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Do you find it ironic that science is fundamentally free market? |
05-19-2016 04:54 PM
#127
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No I wouldn't say I believe that, I believe a structured and policy-based system is needed to keep greed and selfishness at manageable levels. I also don't think I'd call myself a socialist. A government is always going to have non-experts just as free markets are going to have individuals winging it, both are people with identical genetics. You're assuming profit to be the only incentive for doing anything, and that's where I disagree strongly. A lot of people become experts for entirely different reasons, but it might be most of them are women. | |
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05-19-2016 05:02 PM
#128
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05-19-2016 05:28 PM
#129
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Why is it that free market principles are required to ensure the integrity and robustness of science yet not economics or politics (especially since economics and politics are sciences)? What is special about government that keeps those who have its power from needing to be challenged? |
05-20-2016 08:44 AM
#130
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Which principles are these exactly? A government certainly needs a way to keep those in power in check, CoccoBillistan would probably be either ruled by a benevolent informed dictator (me), or have much stricter rules on re-elections, oversight ans transparency as current governments. The priorities get skewed if there are career politicians more interested in getting re-elected than doing their job, and external influence (campaign finance etc) should be weeded out, for example. New employees are great for companies because they bring experience and fresh ideas, but that effect is typically exhausted in a few years. After that it's better they find a new job and a fresh recruit replaces him. Same should happen in the government, if representatives and senators served say max 4 years, they might even have an incentive to get shit done. | |
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05-20-2016 02:46 PM
#131
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05-20-2016 04:22 PM
#132
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Science is decentralized and unregulated. There is no rules committee that assigns the rules by which science must be conducted. I believe that if this were proposed, scientists, nearly without exception, would oppose it, because they have first hand experience with how important it is that science be open to all and have no bias. A regulatory bureaucracy that oversees conduction of science would very quickly spell the end of its integrity. Data would become unreliable and discovery would come to a halt. |
05-21-2016 07:07 AM
#133
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05-21-2016 08:15 AM
#134
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Rilla already covered this bit, but aspects of science are both centralized and regulated. Also, decentralization and unregulation are not principles of free markets. | |
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05-21-2016 11:06 AM
#135
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Why so hostile? |
05-21-2016 11:31 AM
#136
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My b, the Pens got crushed last night and I'm still tasting the tang. | |
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05-21-2016 11:45 AM
#137
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05-21-2016 11:50 AM
#138
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They are, which suggests you're defining them differently. In political contexts, when we say regulation and centralization, we mean things that arise from outside forces, meaning laws are passed and the market is changed regardless of the goings on in that market. Structures and standards are natural in markets. |
05-21-2016 11:55 AM
#139
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What techniques do you mean? Like double blinds and such? Those matter because scientists consider them important for evaluating studies. They don't exist by decree. There is no bureaucracy ruling over the entire scientific community that has a law saying that all studies must be double blind or else they're invalid. |
05-21-2016 11:58 AM
#140
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05-21-2016 11:59 AM
#141
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But there is a bureaucracy ruling over scientists and it's manned by old, successful scientists. They know science and they know how to navigate the harried waters of the unknown. | |
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05-21-2016 11:59 AM
#142
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05-21-2016 12:01 PM
#143
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05-21-2016 12:04 PM
#144
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OK. | |
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05-21-2016 12:05 PM
#145
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05-21-2016 12:55 PM
#146
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05-21-2016 04:25 PM
#147
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The peer review process. Psychology. Why people produce apparently good but ir-reproduceable science. | |
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05-21-2016 05:13 PM
#148
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Plus there's also a discussion about pay-walled peer-review publications and the free labor of peers to review new science. | |
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05-21-2016 05:48 PM
#149
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That's not bureaucracy. |
05-22-2016 03:51 AM
#150
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Citation needed, I can't find them. | |
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