Anti-Capitalist Sentiment (with some morality)

[CoccoBill]

I'd say a £2k bonus to someone making £20k a year is quite a bit more important than even £40k for someone else making £200k. For the former that extra money might be the difference of being able to pay your bills, for the latter maybe buying a new car every year instead of every other year. No question about who'd value getting the bonus more and be more likely to put effort into getting it.

[wufwugy]

To my knowledge people in government earn wages too, which would suggest government employees have the same profit incentives as the private sector.

Employees. The institutions have very different incentives.

If we're using Ong's point, which I think is good here, then public employees having the same incentive as private ones does not make a strong case for government institutions being a good idea.

[wufwugy]

So this comes back to my point about the workers owning the means of production. In such a system, surely the workers are more incentivised than someone merely earning an hourly wage. The profit incentive is now held by the workers, not the shareholders.

And when this is viable, this tends to happen. Skills and risk are matched very well with pay as is. I'll continue this point below.

I'm not suggesting this proves that socialism wins. But I do believe that aspects of socialism can make capitalism better.

Social ownership of companies is legal in capitalism. And it happens. Nobody knows exactly why it doesn't happen more than it does, but the guesses are pretty much about it not working as well as the division of ownership paradigm that most corporations use, because efficiency. This makes sense too, since the model of private ownership and wage earners more naturally reflects the nature of capital. A lot of wage earners would be worse off if they had stakes in the companies, and a lot of companies would be less able to turn a profit (and thus keep employing its workers) if all the workers had stakes.

A wage earner has very big negotiation power. Perhaps the reason this is not a common belief is that wage earners naturally include a lot of people who tend to not use their negotiation power, so the wage earner group appears less powerful than it is.

[wufwugy]

Most of the people I've worked with in life do not want shares in the company or a variable income in any way. They want a secure paycheck which has - above all else - predictability. People raising families don't want to worry that they may not earn enough to feed their families if their coworkers decide to slack off for a while.

Very true. Social ownership increases risk for some who do not want it. It also decreases efficiency by the division of labor being bogged down by more complex responsibilities.

[wufwugy]

You'll find there are certain areas, especially those requiring creative solutions, that money incentives have shown to have a detrimental effect on.

Yeah even sometimes on non-creative work I think. Sometimes when people do things because of money they associate less of themselves or whatever with it. I'm not sure how valuable this knowledge is for macroeconomic policy though. If you want to cut cops' wages in half and just try hiring ones who will do a good job because it's "the right thing", you're gonna have a bad time.

[wufwugy]

should shift from private owners to the workers... in this way, productivity is maximised.

If this improved productivity, we would see great movement in corporations to do it. I earlier mentioned two reasons why it is likely to harm productivity. I may be able to come up with more.

Got one already: social ownership mandates would virtually destroy startups. If Britain legalizes weed and you start growing some Alaskan Thunderfucker, and you are doing well and you wanna expand and grow beyond just yourself, you're gonna have a bad time bringing in new employees, because they'll also have to be owners. You may just want to pay somebody to water the plants and nothing else, but if you have to give him ownership stake, well now you have to find somebody far more reliable, you have to waste time on silly logistics, and your own incentive to grow your company just dropped in the shitter (since your equity diminishes). This would make it so that any new person you bring into your company wouldn't be to just water the plants, but would be somebody similar to you, another entrepreneur who would bring lots of value to lots of elements to the business.

This would have two big effects: (1) it would kick out all the low skill people from the labor force (since nobody is going to get brought on and given ownership to do just low-skill work). (2) It would reduce productivity because efficiency would hit the toilet without a well structured division of labor.

[wufwugy]

The thing with capitalism, and if anyone disagrees please do say, is that the idea is to put a value on things which currently we are so far away from actually being able to do that the idea gets ignored and we talk about money. Incentives are a great thing but they have to be relevant, for example job security has an incredible value that people don't really value correct and a lot of people are very falsely under the impression that their job is much safer than it really is. Anyway a better point is that personal development in your role is an absolutely huge incentive & for a lot of things vastly superior to money incentives whilst also leading to some of the other qualities mentioned such as self-respect. Those should all be accounted for in a real economic system but obviously doing so is hard whereas saying £5 > £4 therefore incentive is too simplistic and as a result when applied across the board it's wrong.

You're definitely thinking like an economist.

[CoccoBill]

Employees. The institutions have very different incentives.

How do the incentives for the boards and upper management of private institutions differ from those of the public ones? Stock options in the private sector come to mind, in contrast to just shared national ownership in the public sector, but can't think of much else.

If we're using Ong's point, which I think is good here, then public employees having the same incentive as private ones does not make a strong case for government institutions being a good idea.

If by Ong's point you mean workers owning the means of production, I would argue social ownership, whether employee-owned large businesses or top-to-bottom stock option programs, are not too popular since those share the profits to a wider audience, and who'd want that if you can get it all to yourself.

[wufwugy]

I think the points I am making relating to industry are supported by this research. Mechanical tasks improve in quality with pay.

If I'm making guesses, I would guess that the causality is backwards. Pay is determined by productivity. Somebody getting a raise to do the same job is unlikely to become that much more productive, if any more, but somebody more productive than the equilibrium wage for his job is very likely to get a raise. And if he didn't get a raise, it would mean that his bosses are bad at business. He could very easily get a job at a different firm making more too.

[CoccoBill]

You're definitely thinking like an economist.

Isn't the economist thinking more the opposite, that is, ignoring all those pesky externalities and just using money as the only metric? :P

[wufwugy]

How do the incentives for the boards and upper management of private institutions differ from those of the public ones? Stock options in the private sector come to mind, in contrast to just shared national ownership in the public sector, but can't think of much else.

Private institutions have to turn a profit in order to remain viable. Public institutions don't. Public institutions receive tax revenues regardless of whether or not they turn a profit.

This is one of the base elements for why so many government programs and institutions get poor results yet keep on trucking along. Private institutions that get poor results go bankrupt and are replaced by others that are more productive. The amount of waste in the private sector is dwarfed by the amount of waste in the public sector, and it is mostly because of the differentiation of the profit incentive between the two types of institutions.

If by Ong's point you mean workers owning the means of production, I would argue social ownership, whether employee-owned large businesses or top-to-bottom stock option programs, are not too popular since those share the profits to a wider audience, and who'd want that if you can get it all to yourself.

If social ownership was more productive, a whole lot of companies would move towards it because the current equity holders would make more money having a smaller share of a much larger pie.

[wufwugy]

Isn't the economist thinking more the opposite, that is, ignoring all those pesky externalities and just using money as the only metric? :P

Externality in terms of money. Asploded head.

[wufwugy]

How do the incentives for the boards and upper management of private institutions differ from those of the public ones? Stock options in the private sector come to mind, in contrast to just shared national ownership in the public sector, but can't think of much else.



If by Ong's point you mean workers owning the means of production, I would argue social ownership, whether employee-owned large businesses or top-to-bottom stock option programs, are not too popular since those share the profits to a wider audience, and who'd want that if you can get it all to yourself.

I forgot to add that "Ong's point" that I mentioned was about employees not having that amazing of incentive to do good work. There is a lot of truth to that. It can be unpacked and better understood, for sure, but the point I was making was that if this is true of all employees, then it would be true of public employees.

It is common for people to romanticize about public service (not saying you do it). Some may think that people who work in public service do better jobs than people who work in private. I mean, the euphemism is in the name, isn't it? Public servant. I think the truth is that government employees are just as shitty (or as great) as private employees.

[OngBonga]

Fair points.

Ok so instead of giving new employees profit share, we give people who have worked at the company for 12 months a profit share, assuming they have met fair productivity targets.

Let's now apply this to my new employee watering my plants. If all he does for 12 months is water my plants, well he's not going to keep his job. I want him pruning the plants too, monitoring pH and humidity levels, pest control, driving to the store to get supplies, perhaps even dealing with buyers... if he's doing all this, well he's earning a share of the profits. That might not be outright ownership, it could just be an annual profit related bonus. Or maybe shares every year of employment to gradually increase his interest. One thing is for sure, you're right that I wouldn't want to give a new employee a slice of the business before he's even proved his worth. I recognise that will stifle innovation.

But if he does prove his worth... well giving him a slice might make such a difference to productivity that I end up making more money too. It would certainly be prudent of me to consider such a scheme, calculating how much extra productivity I need for it to be mutually beneficial.

If he's just getting an hourly wage, well all he'll do is what his job description tells him to do. If he's got a vested interest in the company, well he might start taking more care of the plants, which will have a beneficial effect on yield.

You make a fine argument, but I'm yet to be convinced the problems you outline can't be overcome.

[Savy]

If he's just getting an hourly wage, well all he'll do is what his job description tells him to do. If he's got a vested interest in the company, well he might start taking more care of the plants, which will have a beneficial effect on yield.

Why do you think this is true? When I first started in a job earning just over minimum wage on a zero hours contract I went above and beyond whilst having no intention to stay there long enough to gain any benefits from this in terms of longer term employment, more money, promotions, professional development, etc. It wasn't even in an industry I wanted to work.

[wufwugy]

Watched the video. Good stuff. One thing I would like to point out is that it's not quite accurate when he says that the results seem not like economics. Econ 101 covers quite a bit the idea that people are often more motivated by things other than money profit. In the end of the video, when he says that it's not just that people are profit maximizers but purpose maximizers, he's basically talking about utility maximization. If we take the example of people with jobs doing even more complex hobby "work" in their free times and not getting paid for it, what's going on is that those people are putting subjectively lower opportunity cost on the hobby "work" and a higher opportunity cost on additional paid work.

[OngBonga]

Alright I'll think like a capitalist.

If I'm going to employ someone to help me grow weed, I'll calculate how much extra productivity I can expect as a result of his labour.

First of all, let's calculate how much I can personally manage, assuming a weed legal price of £100 and oz (roughly 70% of the current black market price). I could handle 25 plants on my own easy, and I'd expect to get 4oz a plant as an average, so that's 100 oz a crop (£10k), then five crops a year probably. So, alone, I'm making £50k a year.

Now I employ someone. I'd only do this to expand... and seeing as I can deal with 25 plants alone without a problem, I'd expect two people to manage 50 plants. That's an extra £50k a year turnover.

So I pay my dude £15k a year and give him a £5k bonus if we meet the 4oz per plant from 5 crops target, well he's incentivised to make the target, and I'm paying him less than what his labour is worth to the business.

Would he work as hard if I just paid him £20k a year?

[OngBonga]

Why do you think this is true? When I first started in a job earning just over minimum wage on a zero hours contract I went above and beyond whilst having no intention to stay there long enough to gain any benefits from this in terms of longer term employment, more money, promotions, professional development, etc. It wasn't even in an industry I wanted to work.

You're a rare breed if you're doing more than expected on a zero hours contract with no hope or even ambition of development.

I wouldn't even take a zero hours contract. You were talking of security being an incentive not so long ago. You don't even have that, and you're grafting. Yeah, a rare breed. Either that or naively keen to make an impression.

[wufwugy]

Fair points.

Ok so instead of giving new employees profit share, we give people who have worked at the company for 12 months a profit share, assuming they have met fair productivity targets.

Let's now apply this to my new employee watering my plants. If all he does for 12 months is water my plants, well he's not going to keep his job. I want him pruning the plants too, monitoring pH and humidity levels, pest control, driving to the store to get supplies, perhaps even dealing with buyers... if he's doing all this, well he's earning a share of the profits. That might not be outright ownership, it could just be an annual profit related bonus. Or maybe shares every year of employment to gradually increase his interest. One thing is for sure, you're right that I wouldn't want to give a new employee a slice of the business before he's even proved his worth. I recognise that will stifle innovation.

But if he does prove his worth... well giving him a slice might make such a difference to productivity that I end up making more money too. It would certainly be prudent of me to consider such a scheme, calculating how much extra productivity I need for it to be mutually beneficial.

If he's just getting an hourly wage, well all he'll do is what his job description tells him to do. If he's got a vested interest in the company, well he might start taking more care of the plants, which will have a beneficial effect on yield.

You make a fine argument, but I'm yet to be convinced the problems you outline can't be overcome.

You're totally right and you are free to run your business that way. If it worked out better that way, you'd be silly to not do it.

It's just that for the most part it doesn't work better this way, but people are totally free to do it this way (and some do). In fact, I suspect that some businesses are actually more productive as co-ops (or at least provide more utility), just not a whole lot are. Co-ops take a certain kind of person. I remember when I visited Bellingham, Washington a lot (weed capital of the world btw), they had a co-op grocery/restaurant. It was a very popular destination, but also very niche. The Bellingham town area is populated by lots of people who don't want to live any other way but small, basic, and laid back.


A point I'll make about your hypothetical is that the 12 month mandate mark would also cause lots of problems. We'd see an abundance of people working up to the 12 month mark then being let go. It's an unintended consequence of regulation, which to solve requires more regulation, which causes more unintended consequences, which...you know how this one goes.

[OngBonga]

We'd see an abundance of people working up to the 12 month mark then being let go.

I did consider this as I was typing, which is why I added the caveat "fair productivity targets". If it can be shown in straight numbers that the employee has met the targets, then you're gonna need a really good reason to "let them go".

There isn't a need for more regulation. Unfair dismissal is already a thing.

[Savy]

You're a rare breed if you're doing more than expected on a zero hours contract with no hope or even ambition of development.

I wouldn't even take a zero hours contract. You were talking of security being an incentive not so long ago. You don't even have that, and you're grafting. Yeah, a rare breed. Either that or naively keen to make an impression.

Zero hours contract actually was ideal for me. It meant when I didn't want to go to work I didn't go. If I wanted to take some time off I did. If anything it benefited me much more than the company using it. You're obviously thinking when people exploit them and have tonnes of workers on them who they force into poor working conditions with the threat of no work.

[OngBonga]

Yeah fair enough sav, I've done agency worked in the past when it suited me to ignore the phone at 5am if I didn't want to go in. There is a place for zero hours work, but it's purpose should be casual labour.

[wufwugy]

I did consider this as I was typing, which is why I added the caveat "fair productivity targets". If it can be shown in straight numbers that the employee has met the targets, then you're gonna need a really good reason to "let them go".

There isn't a need for more regulation. Unfair dismissal is already a thing.

Then the 8 month mark instead. Regardless, if policymakers did everything they possibly could to make this regulation "work," then we're back to where we started: where nobody wants to hire low-skill and where production gains are much slower and more costly than they are today.

The USSR went the opposite direction of what I'm describing. They made "hiring" mandatory, and the result was productivity sinking to subterranean levels. In your situation, if people aren't forced to hire, it would have a different (but similarly bad) effect of creating vast unemployment.

[wufwugy]

Something cool to note: a smart wage earner gets more out of the company he works for than the company gets out of him. On-the-job skills learned are of great value to employers. A smart employee gains skills as he works and uses those skills to negotiate for better work and higher pay.

I do not think the solution to low-wage labor is to mandate things. The marking distinction between the low-wage person and the high-wage person is that the latter is more diligent about his success.

[OngBonga]

Something cool to note: a smart wage earner gets more out of the company he works for than the company gets out of him.

This obviously isn't true. If an employee gets more out of the business than vice versa, then the business is destined to fail. Or, at the very least, a company can only afford to employ a small amount of "smart wager earners", as you put it. In the vast majority of cases, the labour is worth more than the wage; it must be for the company to thrive.

[wufwugy]

This obviously isn't true. If an employee gets more out of the business than vice versa, then the business is destined to fail. Or, at the very least, a company can only afford to employ a small amount of "smart wager earners", as you put it. In the vast majority of cases, the labour is worth more than the wage; it must be for the company to thrive.

A smart wage earner moves diagonally.

If we're talking in aggregate, then you're right, or if we're assuming that the hypothetical employee stays at the same company, then you're right.

I was making the point that if you are an employee who actually wants to succeed, you have the tools to provide more value for yourself than for any one of your employers.* I made this point because it's common to think in terms of business owners having a lot of power and wage earners not having a lot of power. This is not true, but I think the reason it's a popular sentiment is that those lower down typically do not employ their power nearly as diligently as higher ups. This makes sense since for obvious reasons those who employ their power more travel up the totem pole as is.

*However, doing so will also provide that value to the economy.

[CoccoBill]

Private institutions have to turn a profit in order to remain viable. Public institutions don't. Public institutions receive tax revenues regardless of whether or not they turn a profit.

Yes, I didn't ask about that though.

If social ownership was more productive, a whole lot of companies would move towards it because the current equity holders would make more money having a smaller share of a much larger pie.

That's ridiculous. Let's assume a small company of 100 people. Let's assume social ownership creates a huge advantage with a 20% rise in profits. X denotes profits. Would you rather get 100% of x or 1% of 1.2x?

[CoccoBill]

Externality in terms of money. Asploded head.

I have no idea what you're saying.

[wufwugy]

Yes, I didn't ask about that though.

Did you ask how upper management incentives differ from private to government? Doesn't the need to turn a profit answer that?

That's ridiculous. Let's assume a small company of 100 people. Let's assume social ownership creates a huge advantage with a 20% rise in profits. X denotes profits. Would you rather get 100% of x or 1% of 1.2x?

In that situation, sure. Some other situations would have shareholders making more.

I have no idea what you're saying.

You mentioned that you think the economist thing is to ignore some externality and pay attention to money things. I responded with the economist thing is handling externality in terms of money. It would be bad news if economics ignored relevant factors. Economists tend to do their best to denote what they can in terms of money, because it allows an objective measurement.

[MadMojoMonkey]

You ignore relevant factors all the time.

You ignore that there are things people value to the exclusion of monetary value. You talk about everything as though human emotional responses are not a real thing which influence people's decisions. People are motivated by so much more than wealth acquisition. People are motivated by a sense of personal fulfillment, by love, by loyalty, etc. to the point where they will scoff at you if you were to suggest you could assign some monetary value to their motivations which would be the $$$ necessary for them to give up their ideals. Not all ideals can be purchased. Sure many can, and for some people, perhaps all can. However, that's not the whole story.

I.e. How much would you need to be paid to completely 180 your opinions on politics? Is there any reasonable amount of money that would get you to believe act in such a way that by all appearances you believe that humans are not rational actors? Or that minimum wage is not cancerous to the economy?

Is there any sense in you that these are beliefs you hold out of their economic convenience and not that they are True Facts?


***
E.g.
You ignore the very relevant factor that your thoughts on minimum wage have never been economically proven, but you adhere to the idea that minimum wage is cancerous to the economy anyway. This is nothing less than ignoring a relevant factor. I'm not saying that you are wrong about minimum wage. I'm saying that your level of assurance that you're right is in direct ignorance of the lack of data. At the very least, you're playing fast and loose with your definition of relevant.

[CoccoBill]

Did you ask how upper management incentives differ from private to government? Doesn't the need to turn a profit answer that?

I did. Government agencies do all sorts of things and operate under various financing and operating budget models. Typically, even when they create goods or services they aim for a neutral operating budget, that is, they don't aim for a profit. This doesn't mean their performance isn't monitored and audited, and that they're not penalized for poor performance. The profit incentives are, while not to the same extent as in the private sector, still there.

That was looking at things from a organizational perspective. When looking at personal level, the directors, their performance is quite identical to a corporation's director, and their incentives and motivations are largely exactly the same. At the very least, saying that profit incentives only apply to private sector is simply untrue.

In that situation, sure. Some other situations would have shareholders making more.

Then you'll surely have no problem coming up with one that sounds even remotely viable. The only one I can come up with is that if you're self-employed, it would make sense to give half of the company to someone provided that it would more than double the profits. The more people you add to the mix, the less likely it is that a shared ownership is more profitable.

You mentioned that you think the economist thing is to ignore some externality and pay attention to money things. I responded with the economist thing is handling externality in terms of money. It would be bad news if economics ignored relevant factors. Economists tend to do their best to denote what they can in terms of money, because it allows an objective measurement.

Exactly, and ignore everything they can't. Or is there a typical monetary value that economists tend to attach to eg. personal development and self-respect?

[Savy]

I imagine the issue is more that $ value isn't the measurement that should be used in fact it should be this sort of true value everything can be defined by (idealistic) of which money is a small part whereas what happens is $ is the easiest so we try to put everything in those terms which is a slight falsehood.

I very much imagine that most things do have a monetary value. There was a great line in Mr Robot (bastardisation version) about a date not going well so the man says to the woman this hasn't gone great but if I paid you a million dollars would you come back and have sex with me, to which the woman thinks and says yes. The man replies what about for a dollar? The woman, outraged by this says "What type of woman do you think I am?". We've already established what type of woman you are, now we're just haggling.

[wufwugy]

You ignore that there are things people value to the exclusion of monetary value. You talk about everything as though human emotional responses are not a real thing which influence people's decisions. People are motivated by so much more than wealth acquisition. People are motivated by a sense of personal fulfillment, by love, by loyalty, etc. to the point where they will scoff at you if you were to suggest you could assign some monetary value to their motivations which would be the $$$ necessary for them to give up their ideals. Not all ideals can be purchased. Sure many can, and for some people, perhaps all can. However, that's not the whole story.

I have always claimed that people value things outside of that which is expressed in monetary terms.

I.e. How much would you need to be paid to completely 180 your opinions on politics? Is there any reasonable amount of money that would get you to believe act in such a way that by all appearances you believe that humans are not rational actors? Or that minimum wage is not cancerous to the economy?

Like others, I'd gladly shill for the right price.

Is there any sense in you that these are beliefs you hold out of their economic convenience and not that they are True Facts?

Like others, I believe lots of things that I don't consider demonstrated fact.

You ignore the very relevant factor that your thoughts on minimum wage have never been economically proven, but you adhere to the idea that minimum wage is cancerous to the economy anyway. This is nothing less than ignoring a relevant factor. I'm not saying that you are wrong about minimum wage. I'm saying that your level of assurance that you're right is in direct ignorance of the lack of data. At the very least, you're playing fast and loose with your definition of relevant.

It would be very foolish to act like there is any reason to think that, when all else is equal, the minimum wage doesn't reduce the demand for labor. This is the case while accounting for the fact that econometricians have not been able to demonstrate causality.

[wufwugy]

I did. Government agencies do all sorts of things and operate under various financing and operating budget models. Typically, even when they create goods or services they aim for a neutral operating budget, that is, they don't aim for a profit. This doesn't mean their performance isn't monitored and audited, and that they're not penalized for poor performance. The profit incentives are, while not to the same extent as in the private sector, still there.

That was looking at things from a organizational perspective. When looking at personal level, the directors, their performance is quite identical to a corporation's director, and their incentives and motivations are largely exactly the same. At the very least, saying that profit incentives only apply to private sector is simply untrue.

The profit motive is not primary on the institutional level in government. It is, however, primary in private business.

Then you'll surely have no problem coming up with one that sounds even remotely viable. The only one I can come up with is that if you're self-employed, it would make sense to give half of the company to someone provided that it would more than double the profits. The more people you add to the mix, the less likely it is that a shared ownership is more profitable.

Employee stock options. This is equity holders selling their equity to employees because they believe it will be more profitable.

Exactly, and ignore everything they can't. Or is there a typical monetary value that economists tend to attach to eg. personal development and self-respect?

My economics professors have spent a good deal of time teaching us to think things like this: "He values his self-respect more than the $40 he's being offered to do this thing that will hurt his self-respect. However, he'll part with his self-respect for $100." In that case, his willingness to lose that specific iteration of self-respect is equivalent to his desire to gain $100.

[wufwugy]

I imagine the issue is more that $ value isn't the measurement that should be used in fact it should be this sort of true value everything can be defined by (idealistic) of which money is a small part whereas what happens is $ is the easiest so we try to put everything in those terms which is a slight falsehood.

I very much imagine that most things do have a monetary value. There was a great line in Mr Robot (bastardisation version) about a date not going well so the man says to the woman this hasn't gone great but if I paid you a million dollars would you come back and have sex with me, to which the woman thinks and says yes. The man replies what about for a dollar? The woman, outraged by this says "What type of woman do you think I am?". We've already established what type of woman you are, now we're just haggling.

Heh, I was thinking of that example. Great show

I remember playing the "what's your price" game in high school. It's pretty eye opening when you're honest.

[MadMojoMonkey]

I have always claimed that people value things outside of that which is expressed in monetary terms.

Always? No, not always. I'd say not even often, if we're only talking about what you post on FTR.
You frequently attempt to make your economic points in terms of only money/profit and not of other human values.

Where do you emphasize the outside values in your position on minimum wage?

Like others, I'd gladly shill for the right price.

EITHER
A) Lies. I'm not talking about trivial things you'd say if you were perhaps working as an advertiser. I'm talking about your core beliefs.
OR
B) Fair enough. I assumed you were a man of principle, and not merely a tool of whatever highest bidder. At any rate, I'm talking about people with core principles which they hold as "unwavering."
I caution you to not be so quick to assume that other people are as variable in their morals as this attitude you just professed.

Let me rephrase, then: How much would you suggest the going rate is to pay a mother not to love her child?

Like others, I believe lots of things that I don't consider demonstrated fact.

So... ignoring my question and changing the subject?

I'm not arguing what you believe, I'm questioning how adamantly you assert certain beliefs, in the light of a drastic lack of the normal standard of proof you require for other beliefs you hold. I'm questioning your use of language which is superlatively affirmative of your economic ideas when you know full well that the standard of proof to which you hold them is less than your usual standard.

It would be very foolish to act like there is any reason to think that, when all else is equal, the minimum wage doesn't reduce the demand for labor. This is the case while accounting for the fact that econometricians have not been able to demonstrate causality.

Very foolish? You resort to a personal attack of your opposition's intelligence?
Not a compelling point.

Act? So anyone who is disagreeing with you is acting? I.e. they do not really believe what they're saying, but are just playing devil's advocate? It doesn't suit you to condescend, wuf.

What indication do you have that "all else is equal?" Why even stipulate such nonsense?

This is the case? You just said if I disagree with you, then I'm foolish or pretending or both, and that the existence of minimum wage doesn't change anything except the demand for labor. None of these things is true, and certainly not a demonstration of your point.

The glaring lack of a demonstrative causal relationship should at the very least quell your adamant stance. Your insistence that this is a trivial point looks more like stubbornness than someone seeking to understand a complicated subject.

***
Your assertion that all of your beliefs are on an equal footing as far as how firmly you believe them is actually a little bit funny or at least a bit cute, but I doubt that's what you were going for. (Now I'm the one condescending, but I am mostly messing with you, here).

[MadMojoMonkey]

My economics professors have spent a good deal of time teaching us to think things like this: "He values his self-respect more than the $40 he's being offered to do this thing that will hurt his self-respect. However, he'll part with his self-respect for $100." In that case, his willingness to lose that specific iteration of self-respect is equivalent to his desire to gain $100.

That's all well and good for the class of things which "he" values monetarily.

What about the wealth of things which he values at infinity dollars?

or 0 dollars?

[wufwugy]

You frequently attempt to make your economic points in terms of only money/profit and not of other human values.

In the post above, I explained how economists think of everything in terms of money (when possible). The policy points I have made favor profit because it is the best known option to account for the most meaningful variables most efficiently, not the perfect and comprehensive option.

Let me rephrase, then: How much would you suggest the going rate is to pay a mother not to love her child?

For most, infinity. It is reasonable to claim that most humans have lines they would not cross for any monetary incentive. I have lines for sure.

I'm not arguing what you believe, I'm questioning how adamantly you assert certain beliefs, in the light of a drastic lack of the normal standard of proof you require for other beliefs you hold. I'm questioning your use of language which is superlatively affirmative of your economic ideas when you know full well that the standard of proof to which you hold them is less than your usual standard.

I do my best, but I'm not perfect. If you see me assert something that you think is wrong, call me on that.

Very foolish? You resort to a personal attack of your opposition's intelligence?

I didn't intend to imply you. I meant me and others who know the theory.

What indication do you have that "all else is equal?"

Ability to hold all else equal is imperative for finding meaningful associations in econometrics.

The glaring lack of a demonstrative causal relationship should at the very least quell your adamant stance. Your insistence that this is a trivial point looks more like stubbornness than someone seeking to understand a complicated subject.

The lack of econometric conclusion on the matter does not change the equation much. This is because of how solid of other empirical conclusions the theory is based on. Consider bouncing a basketball on Mars. Have physicists conducted experimentation enough to conclude that basketballs bounce on Mars? No. If you ask a physicist if it is reasonable to claim that basketballs would bounce on Mars, would he say yes? Yes.

Your assertion that all of your beliefs are on an equal footing as far as how firmly you believe them is actually a little bit funny or at least a bit cute, but I doubt that's what you were going for. (Now I'm the one condescending, but I am mostly messing with you, here).

You'd be doing me a big favor if you called me on the things specifically when I do them.

Y'all need to call me on my shit. I know I post some shit from time to time (even though I try not to, I'm only human). Generalities don't necessarily help me to improve. Granted, calling me on my shit is liable to be a difficult task since I defend myself with vigor, but if you can somehow get it through my thick skull why I'm wrong, I will admit it. That is an absolute promise. I take great pride in admitting when I'm wrong. It is a quality that I believe if I ever lose I will become a silly and stupid person.

I once was a young earth creationist. I was wrong then, and I am capable of being wrong now.

[wufwugy]

That's all well and good for the class of things which "he" values monetarily.

What about the wealth of things which he values at infinity dollars?

or 0 dollars?

Then it's infinity dollars or zero dollars. I mean this literally. If you're holding a snickers bar in your hand and you would not give that snickers bar to a man offering you a hundred trillion dollars for it, that snickers bar is worth more than a hundred trillion dollars to you.

[MadMojoMonkey]

I didn't intend to imply you. I meant me and others who know the theory.

What does that change? You're still saying that anyone "who knows the theory" and still disagrees with its assured application to minimum wage is foolish or disingenuous.

That's a prime feeding ground for echo-chamber thinking.

Ability to hold all else equal is imperative for finding meaningful associations in econometrics.

So you just assert that you can do it, then?
That's not sound reasoning.

How do you reconcile this idea with the description of economic systems as complex feedback loops?

The lack of econometric conclusion on the matter does not change the equation much. This is because of how solid of other empirical conclusions the theory is based on. Consider bouncing a basketball on Mars. Have physicists conducted experimentation enough to conclude that basketballs bounce on Mars? No. If you ask a physicist if it is reasonable to claim that basketballs would bounce on Mars, would he say yes? Yes.

This is a false equivalence and exactly my point about how you have a different standard for what counts as proof when it comes to various things you believe. Or at least the reasons you believe in gravity are at a far lower bar than a physicist's.
You know what, no they're not.
You've never once in your life ever observed anything which acted in violation of gravity. You'd know something was up in a second if you saw some hoax video which claimed to have anti-gravity because that's contrary to your every experience. You simply can't say the same for your economic ideas. Or if you can... you have yet to do so in a way that I agree with what you purport to have observed.

If 2 honest people can't agree on what they observed, then stipulating one of their observations as fact is premature.

I don't believe for a second that econometric conclusions are anywhere near as thoroughly tested as General Relativity. Can you make predictions which are accurate to 30+ decimal places?

The difference isn't trivial. Show me an economic principle which I can't shoot holes in immediately by just examining various human cultures and economies at various scales w/o ignoring the nuance and complexity of individuals.

Your overstatement of your ideas and lack of seeming understanding of when and how far you're extrapolating does your credibility no favors.

[wufwugy]

You're still saying that anyone "who knows the theory" and still disagrees with its assured application to minimum wage is foolish or disingenuous.

Yep. If the theory on this is wrong, the stock market crashes in five, four, three, two, one...

So you just assert that you can do it, then?

Interesting. I'm not the biggest fan of econometrics. Its tools are IMO weaker than econometricians believe and sometimes misleading to the public.

How do you reconcile this idea with the description of economic systems as complex feedback loops?

I don't understand the question.

This is a false equivalence and exactly my point about how you have a different standard for what counts as proof when it comes to various things you believe. Or at least the reasons you believe in gravity are at a far lower bar than a physicist's.
You know what, no they're not.
You've never once in your life ever observed anything which acted in violation of gravity. You'd know something was up in a second if you saw some hoax video which claimed to have anti-gravity because that's contrary to your every experience. You simply can't say the same for your economic ideas. Or if you can... you have yet to do so in a way that I agree with what you purport to have observed.

If I have observed the law of demand not holding up, then the food industry fails in five, four, three, two, one...

I don't believe for a second that econometric conclusions are anywhere near as thoroughly tested as General Relativity. Can you make predictions which are accurate to 30+ decimal places?

The difference isn't trivial. Show me an economic principle which I can't shoot holes in immediately by just examining various human cultures and economies at various scales w/o ignoring the nuance and complexity of individuals.

Your overstatement of your ideas and lack of seeming understanding of when and how far you're extrapolating does your credibility no favors.

I think there is a misunderstanding on the things I'm saying. I'm not a big fan of econometrics. However my opinion on it is forming as I learn more about it.

I do not know much about how the law of demand and the not-exactly-a-law of supply have been created, but you're free to research it. You'd probably understand that stuff better than me, since its mathy. What I do know is that my "if such n such, then failure in five four three two one..." comments are not meant to be snide. If supply and demand are wrong, the economy would not function the way it does now, big league, bigly. Most economic principles (at least as far as I can tell) are derived from supply and demand. When we do comparative statics by applying minimum wage to the model, we get decreased quantity demanded for labor.* The law of demand and not-exactly-a-law of supply have been verified scientifically so thoroughly that they're called laws (except supply, which has one small caveat in some hypothetical situation that I don't think has been conclusively observed in the real world, but that can exist theoretically).

*Previously I said "demand" instead of "quantity demanded." The comparative statics with ceteris paribus shows decrease in quantity demanded (movement along the curve), not a decrease in demand (shift of the curve itself). It's not uncommon to get the two mixed up, but the nitpick is important technically. Most writing from non-economists about economics uses "demand" for both even though it's wrong. I've done it more than once for sure.

[MadMojoMonkey]

Yep. If the theory on this is wrong, the stock market crashes in five, four, three, two, one...

That's not the question. You're saying that not only is this theory true within its tested domain, but therefore true beyond its tested domain, and if you don't agree, then you're a fool, a liar or both.

Its still just bro-talk and echo chamber logic.

It's equivalent to me saying, "This is physics on my side of the event horizon, so it must be the physics on the other side of the event horizon." It may be true. It may not. Until and unless it can be tested it's just speculation.

I don't understand the question.

How can any postulate in economics have "all else being equal" when economic systems are well described as complex feedback loops?
I.e. any change to a large/developed/complex economic system can have repercussions throughout the system.

How can part of your assertion be that there will be no repercussions to the system aside from this one thing?

If I have observed the law of demand not holding up, then the food industry fails in five, four, three, two, one...

These flip answers just shred your credibility, btw.

You can't make specific predictions with this law, so you wouldn't know if you did or did not observe it. You can always apply the law after the fact and say it was there, even when you learn new information which changes your perception of the demands at play which led to the same historical outcome. When a theory describes a thing and its opposite without nuance, then it may be a fun game to play, but it might as well be astrology.

You keep dodging the topic of minimum wage and how you can possibly apply this method of assigning a metric to human emotions, or make any specific prediction about the results of anything related to minimum wage.

I think there is a misunderstanding on the things I'm saying. I'm not a big fan of econometrics. However my opinion on it is forming as I learn more about it.

I do not know much about how the law of demand and the not-exactly-a-law of supply have been created, but you're free to research it. You'd probably understand that stuff better than me, since its mathy. What I do know is that my "if such n such, then failure in five four three two one..." comments are not meant to be snide. If supply and demand are wrong, the economy would not function the way it does now, big league, bigly. Most economic principles (at least as far as I can tell) are derived from supply and demand. When we do comparative statics by applying minimum wage to the model, we get decreased quantity demanded for labor.* The law of demand and not-exactly-a-law of supply have been verified scientifically so thoroughly that they're called laws (except supply, which has one small caveat in some hypothetical situation that I don't think has been conclusively observed in the real world, but that can exist theoretically).

*Previously I said "demand" instead of "quantity demanded." The comparative statics with ceteris paribus shows decrease in quantity demanded (movement along the curve). However I think it is correct to say that the eventual effect is a decrease in demand (shift of the curve itself).

OK, so if you admit you don't understand it, then stop saying barely understood words as though you have real understanding about these True Facts.

If (IF) supply and demand are wrong (on that scale), then the big bigly economy is still what it is, just poorly described, you doof.

I'm saying this thing you hold so highly, as these ideas of supply and demand are fine and work in retrospect on large scales. I'm also saying that those large scales are not the only scales and other things go on in the smallest scales, like households, which are in a very real way affecting the largest scales.

Is it remotely appropriate to assign notions of supply and demand to a family raising a newborn baby? They aren't motivated by economic factors and their values are nowhere treating each other as capitalist resources... well, maybe in the stressful moments, a bit... but that's not their true feelings or best responses. It's not about getting their economic return when they teach the child to read. Your law of supply and demand does not describe these interactions, which are clearly an exchange of value between humans.

Furthermore, if I may bring it back on to minimum wage. Vis a vis the human emotional need to help other people in altruistic ways, is minimum wage a way that society decides to bargain on behalf of those who lack the means, capability or know-how to bargain for themselves? Is it a means whereby society decides that we hold ourselves to a standard where just because someone isn't begging for enough money to live in our society, but are working within the system to try to do so, that doesn't mean that they deserve to starve or die of a curable illness?

Does supply and demand describe this, too?

[wufwugy]

That's not the question. You're saying that not only is this theory true within its tested domain, but therefore true beyond its tested domain, and if you don't agree, then you're a fool, a liar or both.

It's equivalent to me saying, "This is physics on my side of the event horizon, so it must be the physics on the other side of the event horizon." It may be true. It may not. Until and unless it can be tested it's just speculation.

The basketball bouncing on Mars is a fitting analogy. Physicists have great reason to believe that what they know about science is different past the event horizon, but they do not have reason to believe that what they know about gravity on Mars is different than current theory (at least not by more than very tiny differences).

How can any postulate in economics have "all else being equal" when economic systems are well described as complex feedback loops?

It's essential to determining causality. Physicists deal with the same thing. When experimenting, all else must be unchanged even though the physical world is complex. If this isn't the case, confounding variables arise.

I.e. any change to a large/developed/complex economic system can have repercussions throughout the system.

This is a reason why econometric tools are pretty bad at finding effects of minimum wages in the real world.

How can part of your assertion be that there will be no repercussions to the system aside from this one thing?

I don't assert that. In the real world we could see quantity demanded of labor increase after a minimum wage is instituted even while increasing the price of labor decreases the quantity demanded of labor, but it would be because of other variables that changed with the minimum wage.

These flip answers just shred your credibility, btw.

I'll admit the style probably is not persuasive (I was drinking some whiskey), but the statements are correct.

You can't make specific predictions with this law, so you wouldn't know if you did or did not observe it.

We can and have. The law is empirical.

You keep dodging the topic of minimum wage and how you can possibly apply this method of assigning a metric to human emotions, or make any specific prediction about the results of anything related to minimum wage.

I'm answering the question, just apparently not well.

OK, so if you admit you don't understand it, then stop saying barely understood words as though you have real understanding about these True Facts.

My understanding of how scientists came to determine the law has no bearing on whether or not I am allowed to explain what it means.

If (IF) supply and demand are wrong (on that scale), then the big bigly economy is still what it is, just poorly described, you doof.

The laws are probably wrong in very small ways. If they're wrong enough that price of labor increases, when all else is held constant, would increase the quantity demanded of labor, then things would look very different than they currently do. Nonsensically different and there would be no economy. It would be as nonsensical as if physicists were wrong enough about gravity that mass actually repels.

Is it remotely appropriate to assign notions of supply and demand to a family raising a newborn baby?

Yes they apply to everything that involves a decision. As the cost of doing something regarding your baby increases, the desired amount that you want to do that things decreases, on average and all else kept equal.

They aren't motivated by economic factors and their values are nowhere treating each other as capitalist resources... well, maybe in the stressful moments, a bit... but that's not their true feelings or best responses. It's not about getting their economic return when they teach the child to read. Your law of supply and demand does not describe these interactions, which are clearly an exchange of value between humans.

http://www.econlib.org/library/Topic...economics.html

Furthermore, if I may bring it back on to minimum wage. Vis a vis the human emotional need to help other people in altruistic ways, is minimum wage a way that society decides to bargain on behalf of those who lack the means, capability or know-how to bargain for themselves? Is it a means whereby society decides that we hold ourselves to a standard where just because someone isn't begging for enough money to live in our society, but are working within the system to try to do so, that doesn't mean that they deserve to starve or die of a curable illness?

It certainly is society bargaining on the behalf of others. Bargaining badly.

[Poopadoop]

The problems I see with economics as a discipline are threefold (and bear in mind I'm no expert, so take this with a grain of salt):

First, it seems to have at its core the idea that humans are rational creatures who optimize their choices when it comes to money, and thus will behave in predictable ways. In contrast, there's ample evidence that people are irrational in many situations. It's a very shaky foundation.

Second, it's trying to explain a chaotic system. The number of variables and their interactions are so complicated as to be nearly impossible to model, especially when no-one understands the nature of the variables or their interactions in detail.

Third, the sum of the first two problems is that you end up with a discipline where opposing models can have equal theoretical merit, and can be argued for equally convincingly. That makes it interesting and frustrating at the same time, and the overall impression is that neither side really understands things as well as they claim to.

[wufwugy]

First, it seems to have at its core the idea that humans are rational creatures who optimize their choices when it comes to money, and thus will behave in predictable ways. In contrast, there's ample evidence that people are irrational in many situations. It's a very shaky foundation.

Economists are the worst messengers I've come across. "Rational" means something different to them than its usage anywhere else. I recommend not getting hung up on the word. Economists account for every kind of behavior they can.

Second, it's trying to explain a chaotic system. The number of variables and their interactions are so complicated as to be nearly impossible to model, especially when no-one understands the nature of the variables or their interactions in detail.

The supply and demand model has been wildly successful. But yeah, more complex things are very hard to model.

Third, the sum of the first two problems is that you end up with a discipline where opposing models can have equal theoretical merit, and can be argued for equally convincingly. That makes it interesting and frustrating at the same time, and the overall impression is that neither side really understands things as well as they claim to.

At least at the supply and demand level, I don't know of any models that perform nearly as robustly.

[Poopadoop]

Economists are the worst messengers I've come across. "Rational" means something different to them than its usage anywhere else. I recommend not getting hung up on the word. Economists account for every kind of behavior they can.

This doesn't seem wildly different to what I would expect, it only makes it more encompassing than just being about money:

A rational behavior decision-making process is based on making choices that result in the most optimal level of benefit or utility for the individual. Most conventional economic theories are created and used under the assumption all individuals taking part in an action/activity are behaving rationally. Rational behavior does not necessarily always involve receiving the most monetary or material benefit because the satisfaction received could be purely emotional.

Read more: Rational Behavior Definition | Investopedia http://www.investopedia.com/terms/r/...#ixzz4MRh1z5m0
Follow us: Investopedia on Facebook

People make bad decisions all the time, economically and otherwise. Look at all the things where people don't even understand what rational behavior is, like the Gambler's Fallacy.

So it's clearly a very caveat-ridden assumption that doesn't belong at the core of a serious theory. No economist has ever come up with a good explanation for these irrational behaviors afaik.

[MadMojoMonkey]

The basketball bouncing on Mars is a fitting analogy. Physicists have great reason to believe that what they know about science is different past the event horizon, but they do not have reason to believe that what they know about gravity on Mars is different than current theory (at least not by more than very tiny differences).

No. Physicists have no reason whatsoever to think physics is different on the other side of an event horizon. We have no evidence or data on those locations. Every other place we have gathered data, though, physics is the same. So there's an established pattern of same-ness in physics which is independent of location. So, according to your reasoning w.r.t. minimum wage, we have reason to believe physics should be the same. We can guess, but we can't - in good faith - assert those guesses as physical laws.

It's essential to determining causality. Physicists deal with the same thing. When experimenting, all else must be unchanged even though the physical world is complex. If this isn't the case, confounding variables arise.

In physics, we have the luxury of "perfect" control groups in our experiments. When we say, "all else is unchanged" we mean, "look right there where we have the identical setup as here, but over there we do NOT do the thing we do over here. Observe the difference? It does that every time, in a rigorously predictable way." Sometimes that rigorous predictability involves probability distributions, and that's a bit odd to say it was a rigorous prediction, but it truly is. When we define the probability distribution we expect, then show it resolve after many repeated, identical experiments, that's a rigorous prediction.

You cannot do that in economics, and therefore your propensity to compare economic laws to physical laws is, again, false equivalence. The nature of physical law is not the same as the nature of economic law.

... and what bothers me is that it doesn't bother you that you see an equivalence between these very different things.

This is a reason why econometric tools are pretty bad at finding effects of minimum wages in the real world.

If you think they're bad, then why do you cite them as a reason to believe what you believe about minimum wage?

I don't assert that. In the real world we could see quantity demanded of labor increase after a minimum wage is instituted even while increasing the price of labor decreases the quantity demanded of labor, but it would be because of other variables that changed with the minimum wage.

You just said, "if what I said will happen doesn't happen, I'm still right about what I said, but the thing I stipulated wouldn't change - which is the foundation of my argument - wasn't controlled." Which is fine, but you cannot possibly expect to control that OR expect it to hold on its own without an active control. These together strip any meaning from your arguement.

I'll admit the style probably is not persuasive (I was drinking some whiskey), but the statements are correct.

I thought something was up.


... and no, they're not, as I have illustrated.

That's like me saying, "If QM is wrong then atoms don't exist." It's nonsense. The atoms in the periodic table exist regardless of any ideas in humans' heads. Just as economies will exist even if it is shown that the current understanding is garbage.

We can and have. The law is empirical.

No, you can't. No, you haven't. Show me your metric for human emotions and I'll show you a sheet of culturally biased assertions that only apply in microcosms.

That's not what "specific prediction" means.

That's not what "law" means in physics, but maybe what law means in a legal sense.

The economic rules are soft, the predictions vague. Calling them laws is a bastardized use of the word, even in the legal sense.

My understanding of how scientists came to determine the law has no bearing on whether or not I am allowed to explain what it means.

WTF? Pull your head into this space, man. I'd never, ever, in a bazillionplex years assert what you're allowed to do.
JKDS can do that. He enjoys thinking about morals and civil codes.

I'm not telling you you shouldn't say the things. I'm saying that claiming to someone else's expertise without your own observations and research to back it up is the opposite of science.

The laws are probably wrong in very small ways. If they're wrong enough that price of labor increases, when all else is held constant, would increase the quantity demanded of labor, then things would look very different than they currently do. Nonsensically different and there would be no economy. It would be as nonsensical as if physicists were wrong enough about gravity that mass actually repels.

This paragraph is designed to convince me to agree with you, but not compel me to agree with you.

The goal of science is to not let any arguments like this sway what you understand.

The fact that you put these ideas out in the same thought as your reference to physics seems to indicate that you conflate the soft guides in your field which are glorified by calling them "laws" with other ideas which are called "laws." The specificity of predictions that can be achieved in other scientific fields is far and away more precise than any of the soft sciences.

Conflating the weight of various scientific laws as identical is the real nonsense, here.

Yes they apply to everything that involves a decision. As the cost of doing something regarding your baby increases, the desired amount that you want to do that things decreases, on average and all else kept equal.

I can't wait until you have kids.

The point is... there are exceptions to what you just said, but you said it as thought its unequivocal, and that's why your credibility is pretty low on economics. I'm meeting more economists at work and the conversations are very different. They are ready to identify the complications with the rigid assertions you use.

http://www.econlib.org/library/Topic...economics.html

That page contradicts itself a dozen times, but is more of a history of defining economics. Is your point to show me that even the definition of economics is not a rigidly true statement?

'Cause that's what I took away from that link.

It certainly is society bargaining on the behalf of others. Bargaining badly.

More echo-chamber talk.

You have yet to convince me that you have an informed position on this topic.
I still do not agree with your assertion that having a minimum wage has a negative affect on productivity.


***
whew... there went an hour of my time...

I can't keep this up.

[wufwugy]

This doesn't seem wildly different to what I would expect, it only makes it more encompassing than just being about money:



People make bad decisions all the time, economically and otherwise. Look at all the things where people don't even understand what rational behavior is, like the Gambler's Fallacy.

So it's clearly a very caveat-ridden assumption that doesn't belong at the core of a serious theory. No economist has ever come up with a good explanation for these irrational behaviors afaik.

Investopedia can be confusing regarding economics at times. Economists use very confusing language that is different outside of economics. That link does not give the right impression of what rationality in economics is. If it is confusing, don't worry, economists are major dummies at naming things.

In economics, rationality is merely an assumption that people want what they want and that they want more of what they want as opposed to less of what they want. All the examples one can think of "irrational behavior" still fall under this assumption. Economists used a very misleading word to describe this assumption. This is the profession that put the output on the x axis. Believe me, they are the absolute worst messengers.

Do you have any questions on this?

[wufwugy]

Tons of economists have stopped using the word "rational" because of how misleading it is. The word makes it seem like the assumption doesn't account for the irrational while it actually does.

[wufwugy]

Hey MMM I'll do you a solid and leave it there. I think we're mostly talking about different things anyways.

[wufwugy]

Economics is a field of great depth and great rigor, and most of what I do is relate what I've been taught by PhD's in the field.

I don't think I've come across a field that isn't as popular to challenge either. There's a famous quote by an economist that the hardest part about being an economist is that everybody thinks they understand economics. Bryan Caplan has a similar story: he's one of the most renowned economists in the world and his dad, who knows nothing about economics, still tells him he's wrong about some of the most basic principles of the field.

[MadMojoMonkey]

I once told you a personal, first-hand story where I was definitely acting in a manner absolutely contrary to your economic definition of being a rational actor and you ignore it. The example was only economic in the sense that I wanted to do one thing, but did the exact opposite thing out of rote habit.

You (wuf) actively ignore data which contradicts your theories.

This is not common in economists I've been having conversations with. They are ready to explore the fuzzy boundaries of these statements you make, and I think you'll be a much more excellent economist when you see the fuzz, too.

[wufwugy]

I once told you a personal, first-hand story where I was definitely acting in a manner absolutely contrary to your economic definition of being a rational actor and you ignore it. The example was only economic in the sense that I wanted to do one thing, but did the exact opposite thing out of rote habit.

You (wuf) actively ignore data which contradicts your theories.

This is not common in economists I've been having conversations with. They are ready to explore the fuzzy boundaries of these statements you make, and I think you'll be a much more excellent economist when you see the fuzz, too.

What was the example?

I have declared many times that I think humans are deeply irrational.

It would be best if the term rationality was avoided entirely when it comes to economics. Arguments have been had on this forum because the term is confusing since it makes more common sense to think of it in terms of cognitive reasoning. Standard economics attempts to account for every decision regardless of how it is made. Economists chose the wrong word to describe this.

[Poopadoop]

In economics, rationality is merely an assumption that people want what they want and that they want more of what they want as opposed to less of what they want.

How does your definition differ from the one I quoted? 'People want what they want and want more of it' is just a colloquial way of saying they try to maximize their benefit/utility.

[Poopadoop]

Tons of economists have stopped using the word "rational" because of how misleading it is. The word makes it seem like the assumption doesn't account for the irrational while it actually does.

Explain how it accounts for the irrational please.

[wufwugy]

How does your definition differ from the one I quoted? 'People want what they want and want more of it' is just a colloquial way of saying they try to maximize their benefit/utility.

That's what it is. The tricky part is that maximization of utility is assumed to be inherent to decisions. Utility is 100% subjective, and people are always assumed to be maximizing it when they decide something.

The whole thing is circular, but that's okay since it's a base assumption. Those are circular when rationalized. For example, a base assumption of science is that phenomena are repeatable. If we attempt to rationalize why we use this assumption, the explanation is circular.

A popular way of describing economic rationality was presented by Gary Becker: even when a heroin addict suffers under his addiction and knows it and wants to change, when he decides to shoot up again, even though this is totally irrational in the "higher reasoning" sense, in economics it was the action his body/brain/whatever wanted to select more than any other action. The assumptions are that people always want more of a benefit rather than less of a benefit and that each decision is maximizing of benefit.

Explain how it accounts for the irrational please.

Basically what economists are saying is that when the body/brain/whatever wants something more than something else, it chooses that, which is rational. This is a very prime view of rationality. The way we think of rationality today, through the lens of it meaning higher level reasoning and that irrationality is whenever things like emotions or habits or a misfiring or whatever influence a decision, we see so many of our decisions as irrational. But these irrational decisions still fall under the scope of economic rationality because they are the body/brain/whatever-selection-mechanism deciding one action over another.

[Poopadoop]

That's what it is. The tricky part is that maximization of utility is assumed to be inherent to decisions. Utility is 100% subjective, and people are always assumed to be maximizing it when they decide something.

The whole thing is circular, but that's okay since it's a base assumption.

No, it's a problem because it's meaningless. For any given behavior you, you just say 'that's what they wanted, therefore it was rational' . Doesn't mean you've done a good job of explaining it or that you'll be any better at predicting it in the future, because you still haven't answered why it happened except to say 'it happened because it was meant to happen'.

For example, a base assumption of science is that phenomena are repeatable. If we attempt to rationalize why we use this assumption, the explanation is circular.

That assumption isn't circular, it's just plain true. Gravity is the same today as it was yesterday. 2+2 equals four no matter how many times you test it. Constancy in the laws of nature is a good assumption to have because it holds up to scrutiny. Even more importantly, it allows us to make predictions.

A popular way of describing economic rationality was presented by Gary Becker: even when a heroin addict suffers under his addiction and knows it and wants to change, when he decides to shoot up again, even though this is totally irrational in the "higher reasoning" sense, in economics it was the action his body/brain/whatever wanted to select more than any other action. The assumptions are that people always want more of a benefit rather than less of a benefit and that each decision is maximizing of benefit.

Basically what economists are saying is that when the body/brain/whatever wants something more than something else, it chooses that, which is rational. This is a very prime view of rationality.

I'm happy to go along with all that, but it still leads to the problem of being a truism - people do things because their brain makes them do things. That's not a great insight, or anything to base a discipline on. It really explains nothing.

Ok, so teach me - what does economics do that isn't based on bullshit?

[wufwugy]

No, it's a problem because it's meaningless. For any given behavior you, you just say 'that's what they wanted, therefore it was rational' . Doesn't mean you've done a good job of explaining it or that you'll be any better at predicting it in the future, because you still haven't answered why it happened except to say 'it happened because it was meant to happen'.

This is how assumptions work. They are not explanations of natural phenomena.

That assumption isn't circular, it's just plain true. Gravity is the same today as it was yesterday. 2+2 equals four no matter how many times you test it. Constancy in the laws of nature is a good assumption to have because it holds up to scrutiny. Even more importantly, it allows us to make predictions.

Those examples aren't assumptions. Assumptions aren't about holding up to scrutiny. They're about that which can't be scrutinized in the first place.

It has not and cannot be demonstrated that the laws of physics won't change tomorrow. Scientists assume they won't.

I'm happy to go along with all that, but it still leads to the problem of being a truism - people do things because their brain makes them do things. That's not a great insight, or anything to base a discipline on. It really explains nothing.

It's not supposed to be an insight. Assumptions are what we use when there is no known way to get any deeper. Assumptions provide a framework from which science can be conducted.

Ok, so teach me - what does economics do that isn't based on bullshit?

You're not alone in your distaste for the field. It is a very hard pill to swallow, which helps explain why so many economists believe some incorrect things based on their politics and public opinion for which there is virtually no evidence and are contradicted by the literature.

[Poopadoop]

This is how assumptions work. They are not explanations of natural phenomena.

You're missing the point. If Science argued that gravity exists because it exists, you'd say that was a bad argument. But economists say 'people behave how they behave because their brain makes them do that'. It's meaningless.

Those examples aren't assumptions. Assumptions aren't about holding up to scrutiny. They're about that which can't be scrutinized in the first place.

It has not and cannot be demonstrated that the laws of physics won't change tomorrow. Scientists assume they won't.

They assume this because there's no reason to think otherwise. Saying 'you can't assume what you is true today will still be true tomorrow' is a silly argument like saying 'you can't prove there's no God'. On a philosophical level, you can't prove anything. But you can prove things with a reasonable degree of certainty. So your original argument that science has no basis for assuming constancy in nature is bullshit, especially when you try to use that argument to justify the circularity of economic 'laws'. You're just obfuscating the issue.

It's not supposed to be an insight. Assumptions are what we use when there is no known way to get any deeper. Assumptions provide a framework from which science can be conducted.

It's not an assumption it's a truism.

I don't have a distaste for the field, I just think it's a tricky business to model something so complicated as human behavior. What I have a problem with is the lack of humility that many economists seem to have. A lot of them seem smugly convinced they have it right and the rest have it wrong.

[wufwugy]

especially when you try to use that argument to justify the circularity of economic 'laws'.

I'm going to stop you here. Please reread the things I've said. This topic has nothing to do with economic laws.

Too often these things are two people talking about entirely different things.

[Poopadoop]

I'm going to stop you here. Please reread the things I've said. This topic has nothing to do with economic laws.

Ok let's go back to the start. Here's what you said about the idea of rationality in economics:

The whole thing is circular, but that's okay since it's a base assumption.

This is where your wrong. You're saying that it's ok to begin with an assumption along the lines of "people do things because they want something. Otherwise, their brain wouldn't make them do it." I'm saying it's not ok to begin with that assumption.

And then you tried to justify it by saying it's comparable to what happens in Science:

For example, a base assumption of science is that phenomena are repeatable. If we attempt to rationalize why we use this assumption, the explanation is circular.

And I'm saying it's not comparable at all. Science has good reasons for assuming constancy in nature, whether or not it can be proven on a philosophical level. It's not a circular argument like the economic one is - it doesn't say 'there's constancy in nature because things don't change' (which would be circular), it says 'there's constancy in nature', full stop.

So neither of your arguments hold up.

[wufwugy]

Ok let's go back to the start. Here's what you said about the idea of rationality in economics:



This is where your wrong. You're saying that it's ok to begin with an assumption along the lines of "people do things because they want something. Otherwise, their brain wouldn't make them do it." I'm saying it's not ok to begin with that assumption.

And then you tried to justify it by saying it's comparable to what happens in Science:



And I'm saying it's not comparable at all. Science has good reasons for assuming constancy in nature, whether or not it can be proven on a philosophical level. It's not a circular argument like the economic one is - it doesn't say 'there's constancy in nature because things don't change' (which would be circular), it says 'there's constancy in nature', full stop.

So neither of your arguments hold up.

Science has good reasons for assuming humans maximize utility.

If one were to dissect the "constancy in nature" assumption and look for explanations, it would include "because things don't change." Economists spend very little time trying to explain why they use the assumptions they do. I started trying to explain it because there is some big history on this board of attacking economics because "clearly people aren't rational therefore economics is wrong." I agree that people aren't rational. The assumption of rationality is talking about something else though, and the argument that economics doesn't address irrationality is false.

[Poopadoop]

Science has good reasons for assuming humans maximize utility.

The problem is you can define 'utility' along a number of dimensions, be it money, pride, self-respect, etc., and then assign different weights to those dimensions that will allow you to explain anything. In this sense, it's unfalsifiable.

Having a theory that's unfalsifiable is not the same as having a theory that has good evidence for it. The existence of God is unfalsifiable; that doesn't mean there's good evidence for it.

If one were to dissect the "constancy in nature" assumption and look for explanations, it would include "because things don't change."

No it would not. You've created that circular argument in your own head and are trying to ascribe it to scientists.

Scientists believe in constancy in nature because the available evidence strongly supports it. Further, unlike the rationality argument, it's falsifiable. If gravity went all wonky and upside-down tomorrow, a cat suddenly changed into an airplane, and argon bonded with neon, we have to discard the constancy assumption.

What would make an economist discard the maximizing utility assumption?

[wufwugy]

The problem is you can define 'utility' along a number of dimensions, be it money, pride, self-respect, etc., and then assign different weights to those dimensions that will allow you to explain anything. In this sense, it's unfalsifiable.

Having a theory that's unfalsifiable is not the same as having a theory that has good evidence for it. The existence of God is unfalsifiable; that doesn't mean there's good evidence for it.

Assumptions aren't theories. Assumptions are all non-falsifiable.

Scientists believe in constancy in nature because the available evidence strongly supports it.

And why would the supporting evidence be supporting? Because of constancy in nature. Circular. Not falsifiable.

If gravity went all wonky and upside-down tomorrow, a cat suddenly changed into an airplane, and argon bonded with neon, we have to discard the constancy assumption.

These wouldn't void the constancy assumption. These would change theory and law. The constancy assumption can't be voided since doing so relies on the constancy assumption.

What would make an economist discard the maximizing utility assumption?

If I knew that I would win a Nobel.

[MadMojoMonkey]

The fundamental assumption of mathematics is that the number 1 is a meaningful concept, that the observation of distinct-ness between "different" objects isn't some flaw of human perception, that identity isn't absurd.

This isn't a trueism, as you say. It is a postulate.

Whether or not it is a fault of human perception to see one thing as unique to other things, no matter how similar, is unclear.
I mean, we are both people, similar in many ways, but we believe that we are not each-other, for a slew of reasons, all of which are based on our perception. So the assumption that our perceptions are a reliable way to describe us is woven in there.

I'm not saying it's a bad assumption, I'm saying it's undoubtedly an assumption, even if it is never shown to be false, it has no antecedent principles from which it is derived. I personally think the fact that it seems consistent in many ways (I keep perceiving to be me and not you all the time) is a strong reason to think it's not a bad assumption, but that just shifts the un-derivable onto my appreciation of consistency, which is ultimately a part of my perception, and now it's clearly circular.

All fields start with fundamental postulates, which, by definition, are not provable. Their worth is in their utility (change your pants, wuf).

[wufwugy]

The fundamental assumption of mathematics is that the number 1 is a meaningful concept, that the observation of distinct-ness between "different" objects isn't some flaw of human perception, that identity isn't absurd.

This isn't a trueism, as you say. It is a postulate.

Whether or not it is a fault of human perception to see one thing as unique to other things, no matter how similar, is unclear.
I mean, we are both people, similar in many ways, but we believe that we are not each-other, for a slew of reasons, all of which are based on our perception. So the assumption that our perceptions are a reliable way to describe us is woven in there.

I'm not saying it's a bad assumption, I'm saying it's undoubtedly an assumption, even if it is never shown to be false, it has no antecedent principles from which it is derived. I personally think the fact that it seems consistent in many ways (I keep perceiving to be me and not you all the time) is a strong reason to think it's not a bad assumption, but that just shifts the un-derivable onto my appreciation of consistency, which is ultimately a part of my perception, and now it's clearly circular.

All fields start with fundamental postulates, which, by definition, are not provable. Their worth is in their utility

top notch

(change your pants, wuf).

topper notch

[MadMojoMonkey]

What is science without specific predictions?

What can be predicted if constancy is false?

[MadMojoMonkey]

topper notch

[Poopadoop]

Assumptions aren't theories. Assumptions are all non-falsifiable.

Assumptions are the building blocks of theories. If your assumption is shit, your theory is also likely to be shit.

And why would the supporting evidence be supporting? Because of constancy in nature. Circular. Not falsifiable.

Sure whatever.

These wouldn't void the constancy assumption. These would change theory and law. The constancy assumption can't be voided since doing so relies on the constancy assumption.

They would prove the assumption false and require the theory to rethink it's assumptions.

[Poopadoop]

What is science without specific predictions?

What can be predicted if constancy is false?

Yup, we'd have a hard time doing science then. Not sure what else you're getting at though.

[MadMojoMonkey]

Assumptions are the building blocks of theories. If your assumption is shit, your theory is also likely to be shit.

I fully share your skepticism as to the utility of the postulates of economics.

Yup, we'd have a hard time doing science then. Not sure what else you're getting at though.

This convo

They would prove the assumption [of constancy] false and require the theory to rethink it's assumptions.

Sorry if not fully on topic. I think I am, but not positive.

[Poopadoop]

Well sort of I guess. I mean the point isn't so much whether the assumption of utility is circular given all assumptions are circular (on a philosophical level). It's that there's so much flexibility in it that it's unfalsifiable. This isn't the case with the assumption of constancy, and that's what makes it a good starting point whereas the assumption of maximizing utility isn't.

It's not to say there isn't something to the utility idea, it just isn't described with anywhere near enough precision to be useful in the context of science. Not to mention that it can be adjusted post hoc to explain everything. It has very limited value imo.

[Poopadoop]

Granted, economics is a soft science and maybe it isn't fair to hold it up to the same standards as physics or chemistry. That's one of it's problems though, the system is so chaotic as to be nearly indecipherable.

I'm just trying to understand what economics actually has to offer in a concrete sense.

[wufwugy]

I fully share your skepticism as to the utility of the postulates of economics.

I do too. I don't really know what goes into deciding assumptions. My best guess is that original economists said "yo we can only say stuff about what people do if we have an assumption behind it all; something like people want more of something they want and less of something they don't want, where want means whatever they decide."

[wufwugy]

Well sort of I guess. I mean the point isn't so much whether the assumption of utility is circular given all assumptions are circular (on a philosophical level). It's that there's so much flexibility in it that it's unfalsifiable. This isn't the case with the assumption of constancy, and that's what makes it a good starting point whereas the assumption of maximizing utility isn't.

It's not to say there isn't something to the utility idea, it just isn't described with anywhere near enough precision to be useful in the context of science. Not to mention that it can be adjusted post hoc to explain everything. It has very limited value imo.

It could be that the value is to say that when somebody wants something, they want it, as opposed to not wanting it or randomly wanting or not wanting it. This seems like the sort of assumption economics would need.