---Chris Perley <[log in to unmask]> wrote:
> The empirical evidence of rational economic man?  That I would like
to see.
> When ever I have brought this up with economists they talk of
indifference
> curves and utility functions that fit behaviour.  I keep trying to
question
> them as to whether that is how people came to their decisions -
through
> rational processes.  I keep challenging them that that is MERE
description,
> and that I could just as easily describe behaviour in any number of
ways.
> Have you empirically gone inside peoples' heads?

Oh this is just crap.  Psychologist don't "go inside peoples heads"
they look at their behavior.  Sure you can ask people what they think,
but they can always lie or may just not remember accurately.  As for
indifference curves they too are unobservable.  The empirical studies
of economics usually deal with such things as consumption functions
(if your do macro), a demand function (if micro), and there has been
more interest in doing experimental economics where real people are
used.  Try reading Chris, I find it very informative.

> The axioms can be changed.  The primary reason in my opinion that they
> haven't is 1) there is no viable alternative, and 2) the logical
conclusions
> derived from the axioms have largely been supported by the empirical
> evidence.  In reading the Varian article he has pointed out that
there have
> been (experimental) studies on transitivity of prefrences.  This
does not
> mean that if a better alternative is found it will be ignored.  It
might
> take time for the majority of the profession to switch, which I think
> happens in all fields of study.  Even Varian, a noted and frankly
famous (in
> the field of economics) economist acknowledges your criticisms.  Yet
you
> still feel compelled to call him and all other economists religious
> fanatics.  So be it.
> 
> Steve
> I suggested a discipline was a religion if it was based on axioms
> (catechisms) that "were not subject to questioning" (your words). 
You 

The axioms themselves are generally not questioned.  The would only be
questioned if the logical conclusions from them do not hold up to
empirical verification.  In study after study, demand functions have
negative slopes with respect to the price of the good.  Alternatively,
if the axioms lead to a paradox much like you got with the Allais
Paradox or Russell's paradox for set theory.

drew
> your own conclusions.  As to your points 1 and 2 above - I disagree
as to
> alternatives.  I have suggested:
> * an inclusion of psychological hypotheses like social construction
and
> emotion in human behaviour;
> * sociological human power relationships (the fact we can be
influenced - to
> our disadvantage as well as advantage),
> * a movement away from the individual as a basis for economics
(recognising
> society makes individuals as much as individuals make society, so
economic
> dictates have no relevance outside a detailed understanding of a
culture -
> including social mores and ethics - so no "people should act in this
selfish
> way" normative prescriptions that actually feed back into
influencing a
> society to that end [just another example of a non-linear, subtle,
> intangible feedback loops where even the simple language of the
debate has
> the power to change values]);
> *  a better understanding of human (historic, present and future)
> relationships with the environment (with the environment as the
pedestal
> upon which the society and economy works rather than the market as the
> arbiter);
> *  an inclusion of ecological systems analogies that are not so
obsessed
> with mechanistic, quantification and the cult of certainty that the
whole
> reliance on mathematical tools would suggest.
> * I could add another suggestion - an embracing of adaptive
processes -
> where uncertainty is acknowledged and monitoring and review is part
of the
> process (and not monitoring by just economists who see the world
through a
> maze of preferences and utility, either - but by other disciplines
who ought
> to have a say - such as resource biologists, sociologists etc).

Go ahead, try this and you will most likely have a highly realistic,
yet unworkable model.  With all those variable you wouldn't know where
to begin.  If it is so easy why haven't you done it.  If it would be
so good and wonderful at predicition try it and show everyone how much
better your predictions would be.  Models should be simple, and yes
even unrealistic.  Models are not supposed to be recreations of the
real world around us, that is redundant.

As for uncertainty, monitoring and review, try Bayesian statistics. 
It provides such a mechanism for incorporating beliefs, and subjective
information into statistical research and a very nice mechanism for
updating these beliefs when new information becomes available.  Oh,
but wait economists use Bayesian techniques so either it does not
really deal with subjective information since economists don't or it
is just another religion.  Definitely a religion since mathematics
operates of axioms.

> I do not pretend that you will get prediction right all the time,
but its
> record would, I'm sure, be just as good as REM with regard to
individuals
> and markedly superior with regard to societies and the environment.
> 
> As to your point 2.  This is nonsense.  Logical deductions from
rational
> economic man include:
> * "there is no such thing as society" (just a collection of
individuals):

I didn't say you would get results that would mimic in everyway
reality.  You are asking too much of the models.  This is like
complaining that since physics can't explain everything it must be
flawed and useless.

> * people will always do what is "good" for them (it's their
"preference"
> right? - even Veblen's "conspicuous consumption" can be rationalised
in such
> ways)

This is just a load of crap.  There is nothing in economics that
suggest that people do what is "good" for them.  What they do is
maximize their utility, which depending on the prefrences underlying
the utility function could very well be "bad" for them (e.g. eating
too much fatty foods).

> * individual consumers have "sovereignty" over corporates, because
they
> "dictate" purchases - (ie advertising and social influence are no
factors in
> belief)

This is only true in the perfectly competitive environment. 
Economists do look at other market models.  Examples are monopoly,
monopsony, oligopoly, monopolistic competition, and models with
imperfect information, uncertainty, etc.

> * the future is linear

This is bullshit.  The future is not necessarily linear, and
uncertainty plays a big role.

> * market equilibriums exist (just as we used to think the same about
> ecological equilibriums (now we accept constant change as more
> representative of reality);

Wrong.  Equilibrium is something that markets tend to in the right
setting.  There are models that can be explosive given a sufficiently
large enough preturbation.  This is an area that does recieve some
considerabl research...out of equilibrium dynamics.

> * the market will provide the best environmental solutions (premised
on an
> "enlightened" REM);

Wrong wrong wrong.  You fail your econ 101 exam...try again next
semester.  Economics has a huge literature on market failure and the
problems inherent in trying to overcome these problems.

> * the market will provide the best social solution (ditto)

Only under very restrive assumptions.  This is a special case and most
economists would never argue that the assumptions hold for pareto
optimum to obtain.  Further, it is a standard exercise to show that
even a pareto optimal solution can be extremely unfair.  Again you
really don't know the topic you are addressing.

> * the unfettered market will provide the best economic solution
(because we
> can ignore social and environmental costs - most of which are
intangible)

See above comments.

> * market corrections are rational acts by individuals

While the individuals are assumed to behave rationally, there is
nothing to assure that aggregate behavior is rational, hence market
failures.

> * where corrections are extreme and depressions occur then government
> intervention is to blame

No, not all the time.

> * disparities of rich and poor represent an individual's merit, or
they
> choose to be poor (it's all about rational choices right)

Nope, here the government can play large role as well as other factors
such as nepotism, and cronyism.

> * policy decisions such as "we ought to sell national parks if
people aren't
> willing to pay the necessary entrance fee "famously promulgated by
Friedman,
> and also some maniac NZ Treasury officials (who also suggested
Wellington
> University sell its Milton collection - because "value" only relates
to what
> the market (in its omniscient benevolence) will pay.
> * Pretty soon you get to believe the market is the best arbiter o
all things
> because it is just so damned simple

No, it is not simple.  Economists make predicitions that are often
wrong.  One of the problems has to do with a problem known as the
Lucas Critique.

> Q.  Does the empirical evidence support these conclusions?  A.  If
your
> world remains the quantitative linear model, and you describe a
posteriori
> events in terms of rational economic man then I suppose you could
squeeze a
> validation or two out of it (like Reagan's statement about the
people who
> "choose" to be homeless).  It depends how Pontius Pilate like you
want to be
> with regard to the empirical evidence and the rationalisations you
make.
> 
> Granted I'm using extreme examples, but to suggest that the empirical
> evidence supports these points is only more proof that the axiom
cannot be

You have used no examples other than what you think economic theory
predicts.  Your statements are so wildly off base that all I can
assume is that you have never read an introductory text book on the
subject.

> refuted through any falsification procedure.  The believers will
always
> believe it, while those with the common sense to question it will be
> considered heretics.

Common sense?  Is that what you call the factually inaccurate
statements above?  Most of your "comments" were wrong. 

[snip]
>  As far as the empirical data on human behaviour goes, societies and
> > individual perspectives are too different to suggest anything other
> than
> > that socially constructed values filter our observations (yes even
> in the
> > science community) and genetics cannot explain the differences.
> Compare a
> > Taleeban Moslem Mujahideen with a Wall Street banker - they see the
> world
> > through different filters - not an attractive view through either.
> My own
> > value laden observation sees societies
> 
> True, and it would also be interesting to see if the Moslem has
> non-transitive prefrences.  Would he really claim that he prefers
oranges to
> apples and apples to grapes, but grapes to oranges.  Now maybe being a
> Moslem dictates that he have such prefrences, but neither you nor I
know for
> sure...although you claim that he would.  By the way isn't there a
theory of
> evolution in biology that people do everything just to enhance their
chances
> to reproduce?  Hmmmm....sounds kinda like a utility maximizer.
> 
> 
> 
> Steve
> 
> You're still using the language from within your paradigm
(preferences,
> utility maximiser, etc.) to DESCRIBE an event after the event.  It
is still
> individualistic.  It doesn't accord any weight to either the actual
> cognitive processes, or the social influence on an individuals
belief.  On
> your basis no one, no matter what action they take, is doing
anything other
> than being rational and maximising utility.  No empirical experiment
I could
> devise would be able to refute it - ie - under Popperian criteria it
is
> pseudoscience.

Bunk.  I asked if the Moslem had transitive prefrences.  That is one
of the base axioms.  If it can be shown he does not have transitive
prefrences then you might have a case.

[snip]
>  (family/class/friends/education/state/country) influencing
> individuals, I
> > "see" advertising/propaganda and other social factors influencing
> beliefs,
> > wants and perspectives.  But this might just be a Platonic "shadow
> on a cave
> > wall" compared to what reality "really" is.  It is obvious that we
can
> > "reason" - if that means explicitly evaluating selective information
> and
> > coming to a decision from such a basis (the facts are these,
> therefore I
> > will do this), but most of our actions are too implicit in their
> genesis,
> > and too stoked with hormones, to call it "reason".  We eat because
> hormones
> > "tell" us we're hungry - not because we calculate and reason so.  We
> show
> > love, joy and hate out of biochemical emotions, not through reason.
> We root
> > for our team, and value our own institutions because we are born and
> raised
> > to them, not because of calculation.  I suggest that some of our own
> tit for
> > tat posting have the odd bit of emotion in them, even though we are
> using a
> > logical framework.  You want my belief (though I will keep
questioning
> > it)? - It is this: socially constructed implicit values (including
> > metaphysical ethics) dominate human behaviour - not some ideal of
> rational,
> > asocial, acultural, amoral, individual.
> 
> I keep telling you this and you keep ignoring it.  Economists do not
> disagree with this.  Most economists would argue that such
differences would
> be accounted for in various shapes of the utility function. 
Economists do
> not assign utility functions to people, since they tend to be
unobservable.
> (This would be like saying "I know what you are thinking".) 
Instead, they
> attempt to estimate demand curves (while again not observable peoples
> actions [i.e. purchases] are observable) which are a logical
conclusion
> derived from maximizing utiltiy functions subject to constraints. 
Thus, it
> is the data that would determine the shape of demand curves and the
utility
> functions underlying the demand functions.
> Tell me Chris, do you really think that people from a different
culture
> would have intransitive prefrences?  Do you really think people have
> non-convex prefrences (convex prefrences mean people like a mixture
of goods
> and don't prefer to consume just one good)?
> 
> 
> Steve,
> 
> I don't believe people act out of explicit preferences at all.  I
think that
> preference curves and utility functions are the particular shadows
you see
> on the cave wall.  The reality is somewhat different.  The only
virtue of
> REM and the quantitative baggage such as functions and utility is
that it
> allows mathematical convolutions that essentially divorce their
analysis
> from the reality that remains veiled behind the unquestioned
assumptions and
> ignored intangible interrelationships.  The danger is that people
start 

Oh...so physics is a load of crap because they use mathematics and the
physicists are often impressed by the sophistication of their
techniques.  Your statement would be correct if economists did nothing
to test their theories.  They do, the gather data, they analyze the
data, they check to see if the data corresponds to what the theory
tells them they should see in the data.  What more do your want?  An
unworkable model that accounts for every possible variable out there? 
Even psychologists and political scientists use statistical modelling
and par away the unecessary variables to build a parsimonious model.

Here is a problem that economists recognize with their models.  How do
you factor in an individuals concern for others.  Clearly a husband
cares about his wife (or perhaps a child) and if she is made worse of
so is he (generally speaking).  Economics has no way of capturing this
type of interaction  (Dennis Mueller at U. of Maryland has looked into
the problem a little bit...I don't know how far he got with it). 
Economists know this, this is one reason why the results should not be
pushed too far. Too see a derivation of the First Fundamental Welfare
Theorem and then conclude the market is a wonderful panacea for
everyone is so stupid that such a person probably should not be
allowed to reproduce for the good of humanity. <very little sarcasm
here>

[snip]

Steve
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