Skip to main content

View Diary: The algebra formula that saved an industry (258 comments)

Comment Preferences

  •  You know why they used the "rational consumer?" (5+ / 0-)
    Recommended by:
    elfling, JVolvo, kurt, codairem, Larsstephens

    It made the models easier! This is exactly the kind of thing that makes my hair stand on end. I mean yes, sure, you have to stipulate some things that make the calculations feasible on current hardware in a reasonable time frame—climatologists do it all the time—but you also have to control for the error that those stipulations introduce.

    A lot of global warming simulations assume linear effects instead of feedback loops because feedback loops are notoriously difficult, expensive and unpredictable to model, and so the goal is not actually to predict what will happen but to determine whether a variable is significant (like, say, human CO2 emissions) and how significant it is likely to be. The reason every single one of these simulations has understated the nature and extent of climate change is that climate is not a linear system. It's feedback loops all the way down. This is not a criticism of climate science: These scientists, unlike the Chicago school, know the limitations of their model and know how it is and is not useful, and share that knowledge. If only the Chicago school had been that rigorous.

    Government is not instituted for the good of the governor, but of the governed; and power is not an advantage, but a burden. -Algernon Sidney

    by James Robinson on Mon Apr 19, 2010 at 12:07:43 PM PDT

    [ Parent ]

    •  They knew. (4+ / 0-)
      Recommended by:
      ER Doc, kurt, Larsstephens, James Robinson

      I don't really believe that anyone thought homo economicus was anything but a theoretical construct.  At least not among serious academic economists.  Economists, like all scientists, use simplified models to try to understand basic underlying relations.  But, as you note, there are all kinds of ways things go awry.  The equations for motion in a vacuum will not predict where a falling leaf will land on a windy day.  It doesn't make those equations useless.  One thing that economists need to be better at is communicating to policy makers better.  There was a sort of fall back on using the simplified models to communicate basic theory and it lead to some empirically bad policy.  

      I'm convinced that some of the analytic work in economics retains a great deal of value, but needs to be understood in perspective.  One thing that seems to me to be going on (and I'm an outside observer of trends in economics not an insider) is that the behavioral economics trend is looking at ways that incentives and choices can be structured to give people better opportunities to make rational, informed decisions.  This is a positive trend, along with the general trend toward more empirical and historical perspective.  But analytic economics still has as a lot to offer, especially with advances in recent decades modeling rational agency with advanced probability logics.  I got interested in that area by way of interest in some abstract epistemological problems.  It's really cool what can be done with convex sets of probability functions.  A good example of this is the Ellsburg "paradox", where observed agents exhibit risk aversion that's hard to model using a single function but which can be rationalized using sets of functions.  No one thinks that people are literally computing probability functions, but the models provide an interesting way to describe behavior and may provide better normative constraints on risk through improved mathematical understanding.

      Passive renunciation is not the whole of wisdom.

      by play jurist on Mon Apr 19, 2010 at 12:44:52 PM PDT

      [ Parent ]

      •  Yes, exactly! (2+ / 0-)
        Recommended by:
        ER Doc, Larsstephens

        The error of the Chicago economists was that they actually assumed they'd stumbled onto something with the "rational consumer"—it fit an ideology, as well as making for a pretty model—despite the fact that anyone with a background in marketing could have taken them aside and told them that it's actually a bit more complicated than that.

        Also, the results of competently executed models—e.g., of hurricanes—are checked for conformance against actual data. But condescending article after condescending article in the press told us that they'd figured out the way markets really work on their supercomputers, and the people pointing out nonconformance with observed reality were just bitter Keynesians.

        Government is not instituted for the good of the governor, but of the governed; and power is not an advantage, but a burden. -Algernon Sidney

        by James Robinson on Mon Apr 19, 2010 at 01:24:36 PM PDT

        [ Parent ]

        •  ... (4+ / 0-)
          Recommended by:
          ER Doc, kurt, Larsstephens, James Robinson

          Another issue is the structure of incentives in academia itself.  A graduate student facing a tough job market or a young professor looking toward tenure needs to rack up publications.  The best way to do this is to use established methods on tractable problems, not to try to publish contrarian views.  Now, I don't mean to give a general critique of peer review.  There's good reason that it's harder to publish contrarian views because it helps weed out cranks.  However, especially in highly theoretical fields without much empirical contact it can reinforce group think.  Furthermore reviewers are often very busy with their own teaching and research, so that non-crank contrarianism has a hard time getting a thorough fair read.  In my opinion economics is a discipline (along with philosophy--in which I'm a grad student) in which fewer, better articles ought to be written.  But Deans around the country have pushed "quantitative metrics" like number of publications as the standard for assessment and it's created a culture of publish-or-perish that discourages critical work and risk taking.  Maybe one way that this self corrects is that philosophy of science moves in to play a more critical role.  As philosophers look for more places to publish and topics to publish on there's been an increase in work on the special epistemological and metaphysical problems of the social sciences, especially economics.  However, economists don't read philosophers so I'm not sure that outside criticism is going to do the trick.  Hearteningly, it does seem that academic economists are in the process of re-evaluating some of their assumptions and of looking at the social epistemology of their discipline.  Maybe some will even bother to pay attention to the gadflies.  Or maybe in 5 years the crisis will be down the memory hole and the publication factory will be churning out groupthink again.

          Passive renunciation is not the whole of wisdom.

          by play jurist on Mon Apr 19, 2010 at 01:40:14 PM PDT

          [ Parent ]

          •  I'd like to see some more cross-pollination (3+ / 0-)
            Recommended by:
            play jurist, ER Doc, Larsstephens

            as painful as that might be in certain instances, e.g., the book on Feng Shui I was gifted that starts out with the increasingly common spiel that "quantum mechanics proves that everything is energy!" There's a considerable value in having a fresh pair of eyes to look at something, and more value in having to leave the comfort of your professional jargon and its unspoken tenets to explain what you're thinking to someone in plain English. The best way to learn is, in fact, to teach.

            And the process you describe to weed out cranks works exactly the way that damming a river works to stop floods: It smooths out the little ones, but it makes the big ones much worse than they would otherwise be (e.g., turns out the department chair is the crank. Whoops!).

            I'm 100% with you concerning the impact of "quantitative metrics" on academia. People should publish when they have something to say. I wish there was more fact-checking by publishers, as well. I know for a fact that some novels have been more rigorously fact-checked than a great many non-fiction books.

            Government is not instituted for the good of the governor, but of the governed; and power is not an advantage, but a burden. -Algernon Sidney

            by James Robinson on Mon Apr 19, 2010 at 01:58:51 PM PDT

            [ Parent ]

    •  The Economist has (3+ / 0-)

      a great little article on that this week, about how economists make assumptions like the rational consumer and regression towards the mean because they make the math easier, not because they make good predictions.

      Fry, don't be a hero! It's not covered by our health plan!

      by elfling on Mon Apr 19, 2010 at 02:43:07 PM PDT

      [ Parent ]

      •  And ironically ... (1+ / 0-)
        Recommended by:
        Larsstephens

        they blame the consumer when said consumer fails to act rationally.

        I saw a diatribe a year or so ago that said that no rational consumer should consider buying a hybrid unless gas was much more expensive (like $7-$8 per gallon). The writer using this to ridicule hybrid buyers.

        Hopelessly pedantic since 1963.

        by admiralh on Mon Apr 19, 2010 at 03:49:57 PM PDT

        [ Parent ]

        •  and the idea that it's rational to (1+ / 0-)
          Recommended by:
          Larsstephens

          to try and live by our ideals
          or to try and move the market with our purchases
          or that someone might understand the hidden costs of petroleum , are all beyond understanding to them

          republicians, supporters of small gov't and smaller economies

          by askyron on Mon Apr 19, 2010 at 04:54:40 PM PDT

          [ Parent ]

Subscribe or Donate to support Daily Kos.

  • Recommended (144)
  • Community (55)
  • Baltimore (38)
  • Civil Rights (36)
  • Bernie Sanders (31)
  • Culture (28)
  • Elections (28)
  • Economy (26)
  • Law (24)
  • Texas (23)
  • 2016 (20)
  • Rescued (19)
  • Labor (19)
  • Environment (18)
  • Hillary Clinton (18)
  • Education (18)
  • Media (16)
  • Freddie Gray (16)
  • Politics (16)
  • Barack Obama (16)
  • Click here for the mobile view of the site