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Neoclassical economics, j'accuse
February 28, 2011 4:44 PM   Subscribe

"Adbusters invites economics students around the world... to join the fight to revamp Econ 101 curriculums and challenge the endemic myopia of their tenured neoclassical profs." The gist of the Kick It Over Manifesto is largely environmental.
posted by gusandrews (68 comments total) 14 users marked this as a favorite

 
I'm sympathetic to the need to overhaul undergraduate economics, but I have a hard time taking Adbusters' simple-minded dogmatism seriously, regardless of topic.
posted by killdevil at 5:04 PM on February 28, 2011 [6 favorites]


Ehhh... Unswayed.
posted by colinshark at 5:09 PM on February 28, 2011


AdBusters would better serve their agenda by hustling money to endow a few dozen professorships in order to get people who agree with them into positions of influence within academia. But that's not hardcore.
posted by logicpunk at 5:12 PM on February 28, 2011 [1 favorite]


So interference with academic curricula is just fine when it comes from the left, but evil when it comes from the right?
posted by one more dead town's last parade at 5:12 PM on February 28, 2011 [7 favorites]


Conferderated autarky.
posted by clavdivs at 5:12 PM on February 28, 2011


Well, that's an unfortunate font to use for a populist manifesto aimed at people disgruntled by a major economic crisis.
posted by googly at 5:13 PM on February 28, 2011


I have a hard time taking Adbusters' simple-minded dogmatism seriously, regardless of topic.

Indeed. Describing Evo Morales as among those persons "catalyzing a monumental mind shift in economics" is giving him too much credit for ordinary politicking.
posted by Inspector.Gadget at 5:17 PM on February 28, 2011 [1 favorite]


I'm pretty sure some of the issues they are raising are indeed discussed in higher level economic courses. The intro Econ 101 courses are meant to give a taste of some of the basic concepts of economics, and may simplify many complex ideas, but I think they issues they are raising are probably outside of the scopes of an intro econ class.
posted by gyc at 5:18 PM on February 28, 2011


googly: Well, that's an unfortunate font to use for a populist manifesto aimed at people disgruntled by a major economic crisis.

A vaguely Germanic-looking font? Eh, that's a long stretch.

I get the feeling that Adbusters magazines are hymnals for the choir. Everyone joins the choir at some point, but eventually you'll know all the songs, even if they're in different order. It was exciting to get them for a while, but after a while they seemed less exciting: the edgy graphic alterations of known adverts seemed similar to the last edgy issue.

But I agree that GDP is a shallow way to track the progress of a nation, or the world at large. I keep thinking that we've reached a level of surplus where 40 hour work weeks is ridiculous, but the entrenched system of The End Goal is Increasing Profits is pretty fucking huge. Measuring happiness seems cute, but it could be a start.

See also: Robin Hood CEO, two doors down.
posted by filthy light thief at 5:23 PM on February 28, 2011 [1 favorite]


I'm pretty sure some of the issues they are raising are indeed discussed in higher level economic courses.

But also in Econ 101! Flaws with GDP as a measurement of welfare were covered in my introductory macro course, and externalities (including environmental ones and possible policy fixes) were covered in my introductory micro.

Unless my courses were hugely outside the mainstream (and I don't believe they were), this manifesto seems ill-informed to say the least.
posted by ripley_ at 5:23 PM on February 28, 2011 [6 favorites]


Thanks for posting this.
posted by JLovebomb at 5:23 PM on February 28, 2011


I think I've only seen their magazine in design and advertising firms, where "creatives" look at it and say to themselves that design can be used for good, while they spend all day creating advertising for big corporations. I agree with many of their ideas, but I'm not sure they're very effective. I anticipate their challenge to the world of economics academia will be ignored.
posted by snofoam at 5:24 PM on February 28, 2011 [2 favorites]


If mankind commits suicide then let it be a glorious suicide! Let us die in a blaze of fire, drunk off our own technology. Let us shout our name to the stars. Let us die by utterly transforming the planet and by saying "yes, we dared to be greater than we are!"

If we are to save the Earth, let us save it by that same technology! Let us not slink back from the shadows but let us shine brighter than the stars!
posted by Lovecraft In Brooklyn at 5:25 PM on February 28, 2011 [1 favorite]


The author of the petition offers only scant evidence to back up their allegations w/r/t the teaching of economics and how it is viewed or presented to studied at both introductory, advanced and at the practitioner level. the rest is just anger at the state of the global economy. Geologists have yet to be able to successfully and predict the earthquakes, or the timing of major volcanic eruptions with any great degree of accuracy other than it is coming soon +/- some usually useless number. Astronomers can't tell when Bettleguise will go Supernova, or if it has already. Climatologists can't say when the ice pack all melt away in the summer. Metoerogist often struggle with tomorrow weather. Doctors are often forced to try multiple medications to get the pain management right. Engineers still have to look at bridges and structures every year to examine for metal fatigue as there is a high degree of uncertainty in how a structure will ultimately respond to varying real world conditions.

If the only true measurement for the validity of scientific practice is the ability to predict the state of a complex system months and years into the future, then those other profs better be thrown out as well.
posted by humanfont at 5:42 PM on February 28, 2011 [3 favorites]


So interference with academic curricula is just fine when it comes from the left, but evil when it comes from the right?

Oh, you.
posted by regicide is good for you at 5:45 PM on February 28, 2011


Adbusters is still going? And they're still angry? I gave up on them ten years go when I found the magazines made me angry and came to the realization that to buy into their world pu had to be angry about everything all the time and that was a terrible way to define yourself.
posted by AzzaMcKazza at 5:49 PM on February 28, 2011


Are there really people out there who try to to pretend to separate economics from ideology? Definition of insanity etc. etc.
posted by anarch at 5:49 PM on February 28, 2011


most lecturers are quite upfront about the fact that econ101 tells you nothing about how an economy works
posted by moorooka at 5:50 PM on February 28, 2011 [2 favorites]


What's the joke about the only people who buy adbusters are ad execs?
posted by stratastar at 6:07 PM on February 28, 2011


"In other words, the whole concept of a rational, calculating economic man is being abandoned completely. The economic man theory postulates that people have all the relevant information to make the best possible decision. In this new approach people have – at best – imperfect information ... they stumble along, trying to make reasonable decisions, sometimes succeeding but often failing."

Sweet! I think I just found my niche - Exploiting the next generation of economists with a remix of Nyquist and Feigenbaum.

Now If I can just plan it so everything looks great until, overnight, the world's rich and poor trade places...
posted by pla at 6:09 PM on February 28, 2011


Oh, you.

What? In both cases, it comes down to "we untrained interlopers know better than you how to teach your courses."
posted by one more dead town's last parade at 6:11 PM on February 28, 2011 [1 favorite]


The Adbusters contributors include professors, activists, authors, journalists, business owners, etc. Anybody can contribute, which makes the magazine so enriching. They're not just misguided interlopers looking to take up the new cause du jour to relieve boredom. Just thought I would clarify that, as a reader since 2001. It amazes me that when the apathetic people do nothing, they are hated on, and when people with passion for causes that just happen to be culture jammers start something new, such as blackspot or kickitover, they too get hated on. It's disheartening either way to those who want change and are not looking to go about it in the same old ineffectual methods. Maybe the new methods will be ineffectual, but I am glad for those who at least make the attempt.
posted by JLovebomb at 6:37 PM on February 28, 2011


The Adbusters contributors include professors, activists, authors, journalists, business owners, etc.

That doesn't make them qualified to chime in about economics. I wouldn't want anyone from the politics department telling the economics department what they should be teaching—we already know how badly that goes in the real world.
posted by one more dead town's last parade at 6:46 PM on February 28, 2011 [2 favorites]


What? In both cases, it comes down to "we untrained interlopers know better than you how to teach your courses."

The glib response: "And given what some economists often try to pass off as logic, they're probably right. Oh-ho!"

The sincere response: Read the description in the linked site. "Adbusters invites economics students around the world – especially PhD students – to join the fight to revamp Econ 101 curriculums and challenge the endemic myopia of their tenured neoclassical profs. "

They aren't committing "interference," they're suggesting lefty Econ students speak up for their own beliefs and challenge a prevailing dogma. Why they think people aren't already doing this, I don't know (I'm not an Econ student) - but unless informed debate and disagreement stopped being a part of knowledge creation, this just sounds like an exhortation to university students to, you know, act like they're at a university when they go to university.

And unless there's some reference you're making of which I'm unaware, most academic interference from the "right" is done by department heads, boards of governors, presidents, or members of the mainstream media - people who have actual (capital-p) Power - and usually results in firings, flunkings, arrests, censorship, or threats against student groups who bring "lefty" intellectuals to speak. I don't see how that's at all equivalent to an artsy mag putting up a website and saying "Hey students - debate stuff!"

I'll tell you the double standard that bothers me - how anyone perceived as a leftist always seems to be granted a much lower threshold of tolerance for trying to put some (small-p) power behind their ideas than those whose job seems to be endlessly re-translating the status quo.

The Academe will survive this shot across the bow.

p.s. I like your username.
posted by regicide is good for you at 6:54 PM on February 28, 2011 [4 favorites]


That's easy. Revamp Econ 101 by making differential equations a prerequisite.
posted by Ardiril at 7:02 PM on February 28, 2011 [2 favorites]


they're suggesting lefty Econ students speak up for their own beliefs and challenge a prevailing dogma.

and totally kill their academic careers in the process.
posted by moorooka at 7:04 PM on February 28, 2011


when people with passion for causes that just happen to be culture jammers start something new, such as blackspot or kickitover, they too get hated on.

My friend gifted me a pair of Blackspots. They were terribly uncomfortable shoes that failed in all regards:

Cheaper than Converse? Not really.
Comfortable as Converse? Not even.
Not a brand name? Actually, kinda.

They seem to have missed the point that a logo, even a sketchy black circle, is still a logo. The fact that there was anything on the sides at all exposed their hypocrisy.
posted by explosion at 7:07 PM on February 28, 2011


Made by children in hazardous slave labor conditions?
posted by magnificent frigatebird at 7:10 PM on February 28, 2011


Revamp Econ 101 by making differential equations a prerequisite.

econ101 is meant to be a nice, simple story accessible to MBA folk. it's not science and not designed by or for scientists.
posted by moorooka at 7:11 PM on February 28, 2011


For a very thorough, comprehensive criticism of the theory of neoclassical economics, An Anarchist FAQ has an entire section called "What are the Myths of Capitalist Economics."
posted by magnificent frigatebird at 7:15 PM on February 28, 2011 [2 favorites]


it's not science - That's the problem. Economics is science, not a religion.
posted by Ardiril at 7:19 PM on February 28, 2011 [1 favorite]


explosion, sorry your shoes were the wrong fit. One thing they stand for is making sure everyone down the line whom has a part in manufacturing the shoes earns a living wage (and maybe even have the freedom to join a union) for the country they work in. Kind of how it used to be when things were still made with the little guy in mind.

Blackspot is a label but it is also a concept. There are blackspot coffeeshops, from what I gather, with the same goals. As ignoble as you find this cause, sustainability on a global scale has to start somewhere. Adbusters doing so is no more inefficient than Nike not doing so.
posted by JLovebomb at 7:34 PM on February 28, 2011


Quality comes first. I get what they're doing, but I'm not gonna wear uncomfortable clothes just because they're sustainably made. It wasn't a matter of "fit," it was a matter of quality; they were crappy shoes.
posted by explosion at 7:46 PM on February 28, 2011


Spoken like a true...

Never mind.
posted by JLovebomb at 7:55 PM on February 28, 2011 [2 favorites]


The manifesto itself is surprisingly good — far better than I'd have expected from the shallow posing-as-politics that the Adbusters crowd is usually good for (though the blog is certainly full of that, too). But it's still bizarre to see this critique proclaimed as though it were some new invention, from people who don't appear even to have heard that there are graduate programs in heterodox economics and well-established critiques of the social and political function of mainstream economics departments. And it's equally strange, and even more symptomatic of their contradiction-riddled worldview, to see them trying to undertake this whole enterprise without saying the word "capitalism," much less talking at all about anticapitalism. "Open, holistic, human-scale" is some weak fucking sauce to stake your alternative economy on.
posted by RogerB at 8:14 PM on February 28, 2011 [1 favorite]


My, what a rabid bunch of centrists here!
posted by Burhanistan at 8:20 PM on February 28, 2011 [4 favorites]


The other thing, of course, is how deeply these people seem to misunderstand academic politics. It ought to be really obvious that "economics students around the world – especially PhD students" are the exact wrong people to ask for the critique they want, because those people are both institutionally selected and self-selected for their broad agreement with the framework of the discipline, its ways of explaining the world and its politics. This is just how an academic discipline works, for good or ill; all disciplines deploy institutional power and inertia in the service of an intellectual agenda. If you want critique of how a discipline does this, you need to look to its fringes and outside it, not right within its center. This seems like a really obvious thing to me, but since it's a matter of actual institutional power rather than symbolic gestures of rebellion, I guess it's natural that Kalle Lasn can't understand it.
posted by RogerB at 8:21 PM on February 28, 2011 [2 favorites]


Unh, no, Ardiril, economics is much closer to a religion than a science, and all the differentials in the world won't change that. In fact, since human behavior remains unquantifiable, the more equations you try to apply, the more religious equations become.
posted by carping demon at 8:22 PM on February 28, 2011


Yes, yes, Adbusters is annoying, but I think there's still something worthwhile going on here. My economics professors (at academic institutions I would not describe as right-wing), have taught me stuff like "sweatshops are ok!" and "the minimum wage is bad!" Or maybe I just wasn't paying attention: here's a Kick It Over post I liked about the challenges of teaching intro econ courses even as a well-intentioned lefty.
posted by naoko at 8:32 PM on February 28, 2011 [2 favorites]


Quality comes first. I get what they're doing, but I'm not gonna wear uncomfortable clothes just because they're sustainably made. It wasn't a matter of "fit," it was a matter of quality; they were crappy shoes.

I buy normal Cons and they wear out after 4 months. No way Blackspot can be worse than the real thing
posted by Lovecraft In Brooklyn at 8:57 PM on February 28, 2011 [2 favorites]


So... their chief complaint is that countries measure and track GDP? While admitting that GDP is just "one of your measures of economic progress" among many? Dear life, what an unimpressive effort. They're essentially complaining that the big problem with the Hindenberg was its unappealing name. There are real, significant problems with the economics curriculum, but use of GDP as an economic indicator is not one of them.

Examples of problems with the neoclassical curriculum: (1) that consumer "preferences" are discussed as a *psychological* phenomenon rather than a *behavioral* phenomenon (e.g., consumers are frequently described as self-interested "rational maximizers" rather than as decision-makers who are assumed to exhibit reflexiveness and transitivity in their observable choices - has a worse model of human psychology ever been proposed?); (2) that the term "consumer surplus" is used at all; (3) that the term "social welfare" is used at all; (4) frequent use of phrases like "diminishing marginal utility" and "marginal utility of money" (usually diminishing); (5) that macro courses routinely speak of "the" price level or "the" inflation rate, constantly obscuring the possibility of relative price changes; (6) that wealth distribution is rarely discussed in any depth, and almost never with an eye toward political implications; etc.

A fun exercise: try to get ye average undergrad, after having taken both micro and macro 101 (even if both used a textbook by the same author), to reconcile the following: (A) in the macro section, we learn that the long-term supply curve is vertical (i.e., that price is flexible but output is fixed), while in the short-term, prices are sticky but inputs - and hence outputs - are flexible; and (B) in the micro section, we learn that the long-term supply curve is horizontal (prices are fixed, but output is variable), though in the short-run prices are variable but capital is fixed. I've never seen a textbook that addresses these apparent contradictions, and I have never met an undergraduate who could begin to explain the conundrum based on anything learned in undergrad economics.

These articles are full of general statements that are generally wrong. For example, Vernon Smith did indeed revolutionize economics by conducting experiments. But he had uncanny success validating the efficient-market hypothesis and other silly stories we're told in Econ 101. One article by Adbusters' editor-in-chief does nothing more than advocate Pigovian taxation but claims that "[f]or conventional economists, it’s a frightening concept...." Um, no. It's perfectly mundane and early-twentieth-century. One of the essays seems to suggest that asymmetric information and behavioral studies is the solution to all of the problems of neoclassical economics. If that's the case, then there really is no problem - these topics are part of the mainstream curriculum in virtually every economics department in the US.

At least the Kick-it-over folks recognize that Paul Samuelson was a "renegade" thinker. He was, of course, but he was also largely responsible for many of the horrors this group apparently rails against. Samuelson, more than any other person, is responsible for the mathematization of modern economic theory. Marshall was sloppy. Edgeworth was incomprehensible. Hicks avoided math whenever possible. Samuelson borrowed heavily from physics (especially thermodynamics), formalized equilibrium analysis, and spearheaded the focus on maximization.

What's the point? There's no coherent thesis. There's no outline of what they think is actually wrong with "Econ 101". There's no identification of actual people who actually teach the wrongness they claim is being taught. And there's no concrete suggestions for ways to fix things. Did I miss something?
posted by dilettanti at 10:06 PM on February 28, 2011 [9 favorites]


I was a little surprised at the warm fuzzies expressed for Vernon Smith, now that dilettanti mentions it - dude is all Cato/George Masoned up.
posted by naoko at 10:11 PM on February 28, 2011


What's the point? There's no coherent thesis. There's no outline of what they think is actually wrong with "Econ 101". There's no identification of actual people who actually teach the wrongness they claim is being taught. And there's no concrete suggestions for ways to fix things. Did I miss something?

That's about the size of it. I was an early reader of Adbusters, like issues 1-25 or so. Now it has turned into a sad parody of what it used to complain about, plus it's bloody expensive. This economics thing would be funny if it weren't so sad. Instead it's just marketing people's ignorance back to them. Way to go, Adbusters.
posted by anigbrowl at 11:36 PM on February 28, 2011 [1 favorite]


Groupthink in action, on both sides. People against the status quo are in short supply, or only in short supply on MeFi?
posted by JLovebomb at 11:41 PM on February 28, 2011


JLovebomb: Groupthink in action, on both sides. People against the status quo are in short supply, or only in short supply on MeFi?

Well, a supply shortage really just means that the price is too low.... But I believe I said I think there are a number of significant problems with the standard econ curriculum - which would put me in the "against the status quo" column, if we're keeping score. I just couldn't figure out what the Adbusters folks were complaining about. Seemed to be a loose collection of vaguely-related-at-best articles not centered around any particular critique or complaint. But then, I was trained as an economist, so maybe the relevant part of my brain is damaged. If you could help elucidate the critique that Adbusters is supposedly leveling, I'd be ever so grateful.
posted by dilettanti at 11:49 PM on February 28, 2011 [1 favorite]


Ooopsie, I meant to address this part:
A) in the macro section, we learn that the long-term supply curve is vertical (i.e., that price is flexible but output is fixed), while in the short-term, prices are sticky but inputs - and hence outputs - are flexible; and (B) in the micro section, we learn that the long-term supply curve is horizontal (prices are fixed, but output is variable), though in the short-run prices are variable but capital is fixed. I've never seen a textbook that addresses these apparent contradictions.

In macro, you're talking about the economy as a whole. Theoretically, supply is vertical over the very long run (insofar as the universe is finite), but in practice you'll often see sloping supply curves - Keynes pointed out some of the flawed assumption in making too many assumptions about the long run so when you see a vertical curve like that or they start restating Say's law it's usually a simplification. In micro, you're more often looking at the firm than the industry, and certainly not at the economy as a whole. I've never thought of the supply curve in micro as representing anything other than a very narrow subset of the economy, rather than the aggregate of all goods and services as in macro.

On the other hand, textbooks certainly ought to make this kind of thing more clear. I made several false starts at learning economics over the years because many texts introduce or explain the subject so poorly. It took me a while to get used to looking at curves as diagramming relatives rather than absolutes; I did a lot of thought experiments with irrational things like negative supply or upward sloping demand curves to make sure I wasn't learning by rote.
posted by anigbrowl at 12:01 AM on March 1, 2011


Have any of these people even actually taken an economics course?

Externalities, the limitations of various macroeconomic indicators, etc. are all covered in standard introductory economics courses.

Maybe they were smoking too much weed to remember those lectures?
posted by Jacqueline at 12:52 AM on March 1, 2011 [1 favorite]


Huh huh... weed... Huh huh.

Yeah there are qualifications made in passing, a chapter on externalities in the back of most intro textbooks. It all still amounts to little more than one of the intersecting straight lines being slightly shifted. I think it's the whole idea that these "X-marks the spot" diagrams tell you much about how the economy really works that people have a problem with
posted by moorooka at 1:18 AM on March 1, 2011


To even begin to approach the subject of economics one needs a level of foundational knowledge and fluency in terms like supply and demand, utility, pricing, inflation, trade, fiscal and monetary policy, etc. That's a lot of work and most students get only very limited exposure to any of this prior to the college intro course. Once you get through the basic terms and concepts, then you can start to reveal the complexity of the thing.

Does intro to physics start with relativity and quantum mechanics? Or do we start with thongs like laws of motion which arn't really laws... Eg 9.8m/s^2. Perceived s might vary depending upon your frame of reference. Might as well throw put teaching this stuff as well a freshman might end up thinking we live in some kind of clockwork universe.
posted by humanfont at 6:29 AM on March 1, 2011 [1 favorite]


I can't imagine anyone who thinks this group is on to something has ever taken much economics. I teach market failure when I cover externalties, game theory, collective action problems, and market structure, and so does basically every other professor teaching principles of micro. You'd think from readin this there was a conspiracy to keep students from hearing about the concept of market failure, which is absutu ridiculous if that's being implied. Even macro and GDP - openly textbooks acknowledge and document exactly what the stat is recording and what it's not. GDP per capita is mainly valuable bc it has success as a sufficient statistic for living standards but it obviously leaves out alot (inequality). But reading criticisms of GDP seem unaware that it has any usefulness.

What these people mean by neoclassical economics is something that is probably a straw man anyway.
posted by scunning at 7:02 AM on March 1, 2011 [2 favorites]


Unh, no, Ardiril, economics is much closer to a religion than a science, and all the differentials in the world won't change that. In fact, since human behavior remains unquantifiable, the more equations you try to apply, the more religious equations become. -carping demon

First that statement is obviously dogmatic "religious"-like. How do you know that we can't explain behavior "quantitatively" and what's that mean anyway? You are declaring a priori something is impossible? On what grounds?

All of this I suspect hinges on just what you think economics is and is not, but also what science is and is not. Specifically scientific theories and scientific models. I strong encourage anyone here interested to read chapter 1 of Eugene silberburg's textbook "the structure of economics". It's a grad micro book. Chapter 1 explains very clearly how economists conceive of "science", which explains why models that are clearly "untrue" are used.

Most of the criticisms seem to be something like "economics assumes rational choice, and since people aren't rational therefore economics is wrong/stupid/immoral/blah blah blah". But economics as a discipline does not "believe" people are rational utility maximizers, or even that firms are profit maximizers. Economics in it's contemporary form (say last 200+ years) uses models which are based on assumptions. Those assumptions are needed because without them the model cannot make predictions. Ultimately, it's the falsifiability of theoretical models that most economists have in mind when they say economics is a science. Testing the models predictions is another matter - it is in no uncertain terms a huge pain in the ass to test theories of people ever, but especially without controlled experiments - but that is why economics has as it's companion econometrics.

I can only speak to my experience on this. I was an literature undergrad major and did a phd in economics. Both are very different but overlapping fields for understanding human beings. Same with sociology, Poli sci, history, anthropology, and so on. What economics fundamentally seeks is something other than what the writers want here bc they seem to not value the underlying scientific (defined in this popperian sense) orientation of modern economics. But it seems to me that is where the crux of the debate is. What is a "scientific theory", and what constitute a test of a hypothesis (and what does not).
posted by scunning at 7:21 AM on March 1, 2011 [2 favorites]


On a side-note, economics 101 classes themselves are often criticised for having far too much content, i.e. for trying to cover too much dense and technical (mathematical) material in too short a time with the result that students 'graduate' baffled and confused, and no more able to apply basic economic principles to the real world than those who never took the course. That may explain the strangely authoritative ignorance of the Adbuster authors.

NB The mainstream economist Robert Frank has been banging on about this for ages (e.g.) and adapted his econ 101 class to focus on practising the application of basic principals. He claims some success and it is the basis for his économics-made-fun genre Economic Naturalist (ch 1).
posted by Philosopher's Beard at 10:35 AM on March 1, 2011 [1 favorite]


That people are "rational utility maximizers" is a pretty much tautology. Veblen's "why is economics not an evolutionary science" is as relevant as ever.
posted by moorooka at 1:54 PM on March 1, 2011 [1 favorite]


anigbrowl: In macro, you're talking about the economy as a whole. . . . In micro, you're more often looking at the firm than the industry, and certainly not at the economy as a whole.

I realize this is a bit of a derail, but wanted to follow up. You're right, of course, but that suggests the question: how do a bunch of horizontal firm or industry supply "curves" aggregate to a vertical economy-wide supply curve? Almost no undergrad econ courses spend any real time discussing general equilibrium issues. Closest they usually come is a page or a lecture on economies of scale.

moorooka: That people are "rational utility maximizers" is a pretty much tautology.

That they behave consistently with rational maximization is a near tautology; that they are psychologically intentional, rational maximizers is not remotely tautological. Sadly, many economics professors (and textbooks!) speak about maximization in psychological terms - that people get x amount of "satisfaction" from some basket of goods, and that's why they choose it over some other basket that only provides y amount of satisfaction. It's nonsense, but it's ubiquitous nonsense. As I said - has there ever been a worse model of human psychology and motivation proposed?
posted by dilettanti at 2:59 PM on March 1, 2011


I agree that the presentation of the 'curve' is dreadful. I learned my economics from books rather than in class but went through a great deal of eye-rolling in the early stages, probably for the same reasons you are talking about.

If I were trying to teach it to someone else (and perhaps you know of some books that take this approach), then I'd start with easily graspable problems that are easier to solve with economic tools - say, the economics of running a coffee shop or a corner store. Or I think I mentioned on a previous thread about multiplayer space-war game Eve Online, which has a highly developed economic system, one could usefully spend a semester trying to find rules for successful play of the game, and then spend the following semester using economic theory to explore other strategies.

I also think we'd do better to examine why morality is a poor proxy for economic analysis. Just as with civics, it's a real problem that so many people (and I include my younger self in this) have such a poor understanding of economics that discussions about it usually degenerate into meaningless arguments. People die in falling accidents all the time, but nobody complains about this during discussions of gravity in a physics class. My first breakthrough with understanding economics was when I got past the idea that it was primarily about money and started using it to solve problems involving the allocation of time.

And yes, satisfaction as a proxy for utility is also a pretty terrible concept. Lately I've been trying to grasp Thomas Schelling's approach, as in this (pdf) approach to dealing with an addiction to cigarettes, where he disputes Gary Becker's assumption that smoking maximizes some benefit for the smoker whose utility outweighs the known costs and risks.
posted by anigbrowl at 3:39 PM on March 1, 2011 [1 favorite]


The hedonistic conception of man is that of a lightning calculator of pleasures and pains, who oscillates like a homogenous globule of desire and happiness under the impulse of stimuli that shift him about the area, but leave him intact. He has neither antecedent nor consequent. He is an isolated, definitive human datum, in stable equilibrium except for the buffets of the impinging forces that displace him in one direction or another. Self-imposed in an elemental space, he spins symmetrically about his own spiritual axis until the parallelogram of forces bears down upon him, whereupon he follows the line of the resultant. When the force of the impact is spent, he comes to rest, a self-contained globule of desire as before. Spiritually, the hedonistic man is not a prime mover. He is not the seat of the process of living, except in the sense that he is subject to a series of permutations enforced upon him by circumstances external and alien to him.

Thorstein Veblen, 1919
posted by moorooka at 5:44 PM on March 1, 2011


"Economics in it's contemporary form (say last 200+ years) uses models which are based on assumptions. Those assumptions are needed because without them the model cannot make predictions. "

Indeed. Assumptions, if they are to provide a foundation on which to build models of reality, must be based on valid observations of naturally occuring events, many of which must be human behaviors. Many of the assumptions made 200+ years ago by the likes of Smith, Malthus, Ricardo and Mill, owing to the nascence of social studies and the turmoil of the Industrial Revolution at that time, were made in ignorance of "natural" human behavior. That these assumptions succeeded in prying 95% of the population away from the land to which it had been tied for millenia and thus created a "market" for human labor to accomplish the industrialization of Western Europe certainly made them useful for particular segments of society. But it did not make them reliable assumptions.

The last 100 years of anthropology has made that abundantly clear. The human being does not naturally "barter, truck and exchange." He does not naturally seek "gain;" hence, he does not need "utility" and does not seek to "maximize" it. He can be taught to behave as though he does do these things, but this will be learned behavior rather than naturally motivated behavior. I.e., the behavior he has learned to display is not driven by natural motives, and since he is a real human being with real motivations, such learned behavior does not reveal what actually brings him to do whatever it is he does. His natural motivations remain inherently non-quantitative.

Models can be constructed to be consistent with assumptions based on any observations, provided the models and assumptions are chosen specifically to accomplish that. But that's not science. It's more like religion.

Or literary theory.
posted by carping demon at 9:27 PM on March 1, 2011 [1 favorite]


"I think it's the whole idea that these "X-marks the spot" diagrams tell you much about how the economy really works that people have a problem with"

All models are wrong but some models are useful.
posted by Jacqueline at 12:07 AM on March 2, 2011 [1 favorite]


All models are wrong but some models are useful.

and some aren't. that's the point.
posted by moorooka at 4:39 AM on March 2, 2011


Indeed. Assumptions, if they are to provide a foundation on which to build models of reality, must be based on valid observations of naturally occuring events, many of which must be human behaviors.

This isn't right. It isn't even wrong.

Assumptions can be anywhere from almost perfectly accurate to wildly, laughably inaccurate. The proof of their pudding is never, ever how closely they approximate reality, but only the quality of predictions they generate compared to the simplicity of the assumptions.

Standard microeconomic assumptions are very, very simple and in many circumstances generate reasonably okay predictions. Obviously, in other circumstances they don't, and there are vast fields of microeconomics dedicated to alternate sets of assumptions.

The important thing is that they do remarkably okay, in some circumstances, for such simple assumptions. They're a little tiny bit that buys you a lot.

His natural motivations remain inherently non-quantitative.

This doesn't even parse as an English sentence. How can a motivation be quantitative or nonquantitative?

Do you mean quantifiable, like you said before? I'm sorry, but that's just goofy. Anything contained within the physical universe is quantifiable.
posted by ROU_Xenophobe at 6:29 AM on March 2, 2011


"Two different worlds
We live in two different worlds"
posted by carping demon at 11:15 AM on March 2, 2011


anigbrowl: Lately I've been trying to grasp Thomas Schelling's approach, as in this (pdf) approach to dealing with an addiction to cigarettes . . . .

Thanks for posting the Schelling article. I've read two of his books, but had never seen this piece. I have read plenty about hyperbolic discounting, multiple selves, and self-control mechanisms, but Schelling was such a wonderful writer - I very much enjoyed reading that. Thanks.

moorooka: The hedonistic conception of man is that of a lightning calculator of pleasures and pains . . . . Thorstein Veblen, 1919

Veblen nailed it. That conception is of personhood is absurd, but it seems to be the prevalent picture of homo economicus among professors and students of economics and law. Thanks for the snippet.
posted by dilettanti at 12:03 PM on March 2, 2011


That these assumptions succeeded in prying 95% of the population away from the land to which it had been tied for millenia and thus created a "market" for human labor to accomplish the industrialization of Western Europe certainly made them useful for particular segments of society. But it did not make them reliable assumptions.

Ah yes, the great pre-industrial period of universal peace and harmony, when all were noble content and free. Sure, they had numbers and money in ancient times, but nobody ever polluted their mind with the idea of analyzing things, they all just drifted along in a sort of blissful haze until that bastard Adam Smith showed up.

Pyramids, ancient cities, vast armies of conquest - all spare-time activities by amateur enthusiasts. No economic analysis involved, not at all, no way. It's really quite incredible how the Romans had armies of up to half a million soldiers, and somehow everything just kind of sorted itself out.

The last 100 years of anthropology has made that abundantly clear. The human being does not naturally "barter, truck and exchange." He does not naturally seek "gain;" hence, he does not need "utility" and does not seek to "maximize" it.

You appear to be saying that primitive hunter-gatherer tribes have no need for any kind of economic relations. This may be true, but they don't seem to have much use for writing, science or table manners either. As soon as people start making decisions rather than acting on pure instinct - somewhere around the same time that they develop a concept of time and quantity and start building permanent structures - then they have to begin making economic decisions of some kind, even primitive ones. Awkwardly for you, economics turns out to be useful in analyzing and predicting things like the behavior of ant colonies, despite the ants' complete lack of interest in the subject, but with interesting implications for markets.

I mean, you can solve your own resource problems by consulting tarot cards or consulting a shaman or just waiting for the universe to provide or not as it sees fit. What problems are you able to solve with your non-quantative approach?
posted by anigbrowl at 5:19 PM on March 2, 2011 [2 favorites]


Who said anything about peace, harmony, nobility, freedom and contentment? Who denied that people analysed? Of course they analyzed, that much is natural human behavior. And of course anywhere there is a community there is an economy. Pyramids, ancient cities, vast armies of conquest, etc., etc. were parts of some societies' economies, but various manifestations of force combined with analysis were sufficient to organize all those things. Market economy didn't exist then. It wasn't needed. No one had to profit. No one had to choose what to do, though some people did choose because events led them to it. Everything was analysed and assigned by those who had learned to choose. A command economy. This worked because men, having no natural motivation to get ahead of the next guy existed only as members of the groups into which they were born. Leaders and decisions were already there when they came along. Natural is the crux.

Now, Adam Smith was a good man, much of whose work has been distorted for one reason and another over the intervening centuries, but his idea that man naturally seeks to improve his situation, that is, to gain or profit at the expense of other men, by barter, truck and exchange was a mistake which disallowed a clear understanding of the market economy that was developing at the time.

Ants, per your paper, (I envy your access to jstor) do have a natural impetus to go to one of the sources of food and then switch to the other-- they have no choice in the matter. The ones who have survived to be observed do it naturally. Economics does not predict ant behavior, biology prescribes it. But people don't go to one or the other restaurant, or buy one fund or the other except by choice, and if you inject unnatural behavior such as utility maximization into your model's assumptions, then your attempts to quantify people's choices will fail. As they have, dramatically.

On the other hand, if you reduce all observations, ants, financial markets, restaurant rows to simple streams of raw data, you can make up any models you want to, based on whatever assumptions you like. For those models to have interesting implications for the human condition, though, (and why else would you bother with them?) there must eventually be pshcyo/social/anthropologic theory which directly connects the data streams to real human behavior. Stochastic equilibria and out of sample tests do not do that.
posted by carping demon at 10:29 PM on March 2, 2011


This is starting to sound very much like arguments against the theory of evolution - incompleteness, failure to provide a complete explanation for all known phenomena, nature is too complex to be reduced to such simple mechanisms etc.

The utility of a model lies in its predictive power. No model is perfect in that respect, so we must be prepared to abandon our economic models of choice whenever we encounter ones that yield more reliable predictions about events in the real world. That's why it's not a religion; we know perfectly well that our models have flaws and limitations, and will be replaced as soon as something better comes along.

You're arguing that we need to throw our models away, but I don't see you providing a better alternative - and by better, I mean a theory that people can actually use to solve problems.
posted by anigbrowl at 2:38 PM on March 3, 2011


I just realized I have never said that I am talking about macro, not micro, if it matters. Would you say that macro can be derived from micro, as some are trying to do?

Do you mean to equate evolutionary theory and economic theories? Or economics and nature? That might clear up this argument, if that's what it is.

Could you give me an example of a prediction, i.e. a forcast of events to be expected in the future that some economist(s) has made that has been borne out by following events, not just used as a counterfactual? That might also help.

Are you suggesting that abandoning models as soon as something better comes along is common (or even professionally accepted) behavior among economists whose models actually affect policy decisions?

If a man (or a society) is in the bottom of a pit, furiously digging his (their) way out, you have to get the shovel out of their hands before they can grab a rope, if one is waiting. Of course, if you don't have a rope, you could just let them keep digging, if you want.
posted by carping demon at 3:14 PM on March 3, 2011


Well, I am mostly talking about micro, and while I think macroeconomics is useful I certainly don't think it gives definitive answers to all situations - and more so when it's being used as an input to policymaking. That said, quite a few people were pointing out the non-wisdom of the US racking up ever-increasing levels of debt before the recent recession, and saying that the housing boom was a bubble and would pop in painful fashion, and that allowing the top rate of tax to go back up again might be a good idea.

If a man (or a society) is in the bottom of a pit, furiously digging his (their) way out, you have to get the shovel out of their hands before they can grab a rope, if one is waiting. Of course, if you don't have a rope, you could just let them keep digging, if you want.

Why? You seem to think someone in a pit can only dig downwards. If you're in a pit with a shovel and no rope, throwing down your shovel won't get you anywhere either. You could, however, start work on constructing a ramp or a set of stairs. Think about it.
posted by anigbrowl at 7:27 PM on March 3, 2011


Why? You seem to think someone in a pit can only dig downwards.

No, its simply that that's about the only thing I've ever seen anybody do, and the few times someone did suggest an alternative approach, they weren't in the pit when they thought of it.

You didn't need models to predict the deflation in housing, (I predicted it in 2004 and managed to keep friends from "investing" in houses at the time.) Neither do you need them to see the "non-wisdom" of continually expanding debt although that "non-wisdom" isn't going to guide you as you try to reduce the debt. On the other hand, I didn't see anyone touting models that predicted the credit market freeze, though I have seen models that directly contributed to it. The Feds, CRAs, Monolines, pension managers, investment bankers and hedgies were up to their eyeballs in models. They weren't winging it, they were modeling. Look around you. I'm OK, and I hope you're OK. But most people will work some long years to get back to where they thought they were in 2007, thanks to all that modeling. And they're still modeling, but they're not modeling how to carry on interstate trade on decrepit highways and deteriorated bridges at $10 diesel, or how to ship grain from leaky elevators on poorly supported, loose, rails to ships just out of mothballs paying 4 times current fuel prices, or route water that won't be there in ten years to new "developments" that will be ready to fall down in five. No, they've pulled out the same old models predicting success for cov-lite loans and CDOs squared again. They're still digging down. And crowing about it.

Putting the top tax rates up to where they were in the '50s would be excellent policy, but you won't find anybody seriously able to consider it until they let go of the g--d----- shovel.
posted by carping demon at 11:07 PM on March 3, 2011 [1 favorite]


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