Re: Paul D. on this year's Nobel

[mongiovg <mongiovg@xxxxxxxxxxx>]

I think Paul misunderstands me on a few points.

>>This work moreover implies that propositions built on the supposition that
>>agents are rational in the economist's narrow conception of rationality are
>>defective.  I don't understand why Paul, a long-time critic of orthodoxy,
>>finds this result uninteresting or unimportant or irrelevant.
>
>The concepts of rationality built on Lucas (where rational expectations
>makes rational decisions both a short run and a long run concept)-- or even
>Milton Friedman's long run "as if" rationality, are NOT logically defective
>within their individual axiomatic systems!! And if you understand Bourbaki
>mathematical philosophy  and the concept of proofs and truth -- these
>mainstream rationality concept can be proved and are true -- within the
>mainstream  axiomatic system that they are erected in.
>

I never said that the orthodox conception of rationality is logically
defective.  I said that the propositions built upon that conception of
rationality appear to be empirically unsound because people don't behave in
conformity with them. I draw your attention to the last part of my last
sentence: "people don't behave in conformity with the propositions of orthodox
theory." Correct me if I'm wrong, Paul, but I don't think you and I disagree
about this. Smith and Kahneman have provided some useful ammunition for
advancing that claim. I may have methodological differences with them (not the
same as yours, of course), but I'm not gonna look a gift horse in the mouth.

>
>> >And if rational choice is possible, then there are five dollar bills lying
>> >in the street, and those who make these choice -- even if they do not
know
>> >the choice was rational --but merely act a"as if" they knew -- will
collect
>> >all those five dollar bills!
>> >
>>
>>This is a non sequitur. Behavioral economics suggests that the context in
>>which a choice is made can influence the choice in subtle and complicated
>>ways.
>
>
>Ah! yes subtle and complicated ways is the coverage of all theoretical
>scoundrels----
>we can hypothesize an infinite number of ad hoc behaviorial ways which will
>get us to one solution one time and another solution another time -- and
>therefore never have a general theory --as a basic -- fewer axioms-- system

There is nothing ad hoc about recognizing that human and social behavior is
subtle and complex. If you don't believe me, talk to somebody who actually
knows something about it, like a sociologist or a social worker. Come to think
of it, isn't that what a lot of these behavioral economics guys did?


>> >
>>
>>Behavioral economics gives insight into how agents make choices in certain
>>contexts and circumstances.  Whether we call those choices rational or not
>>depends on how we define "rationality" but is irrelevant to the soundness of
>>the BE results.
>
>
>Nonsense -- either rationality means something specificor  your suggested
>defibition is ambiguous.  You can not have it both way. Or do you intend to
>define rationality -- as whatever people do is rational?  So if someone is
>shooting people at random in the Washington, DC area , then under his
>conditions and circumstances, the sniper is rational!

Fair point.  What I was getting at is that I don't think the concept of
rationality is very useful as an element of scientific discourse, mainly
because it doesn't advance our understanding of actual behavior--it's just a
normative label orthodox economists assign to behavior that validates their
propositions and withold from behavior that does not. What matters in the end
is whether a proposition holds up under empirical scrutiny. The latest
Nobelists tell us that at least some of the propositions of orthodox theory do
not. That is useful to know. What I don't think is useful is the application
of the label "irrational" to behavior that does not conform to the predictions
of orthodox theory; that's just name calling, and it implies that it's not the
theory that's defective but those doggone irrational agents who won't get in
line with it.


>
>>  Maybe they're not sound in nonergodic circumstances; that's an
>>empirical question.
>
>
>No it is NOT an empirical question.  It is a logical question of building
>the fewest axiomatic system  to rigorously be able to describe behavior!!
>

A typical BE claim is that a person might be willing to mow his own lawn in
order to save the $10 he'd have to pay his neighbor's kid to do it, but he
wouldn't mow his neighbor's lawn for $10. This pattern of behavior is in
conflict with orthodox premises about how people make marketplace decisions.
Whether this behavior pattern is typical of a large class of market decisions
is an empirical question, and it hasn't got anything to do with ergodicity.
It's got to do with how human beings make choices. Ditto results suggesting
that choice behavior doesn't always conform to the transitivity axiom.  I
wonder, Paul, if you'd be so bothered about this stuff if the argument had
been put forth by a team of psychologists who didn't know Ken Arrow from a
whole in the wall. My point is that the interesting and useful bits might as
well have been discovered by psychologists: what matters is whether it casts
light on how people really behave. To the extent the BE people try to
reconcile their results with orthodoxy, they're engaged in a hopeless
enterprise. But once you've tossed out that rubbish, there's still something
useful left.

>

>
>No Smith's work shows that "in special cases" of the Debreu general theory,
>his results may hold.  The policy implications is get rid of the ad hoc
>constraint -- usually that means giving people better information about the
>future (as if that was possible) implied through the soundbite -- of open
>and free markets , a level playing field, and transparency. And if you
>believe this Washington consensus , I got a bridge that connects Brooklyn
>and Manhattan that I would like to sell you Gary!
>

That's an impressive series of leaps, Paul.  You go from my suggesting that
there might be something worth looking at in BE, to my accepting Arrow-Debreu
GE theory, to my accepting the Washington consensus.  Is there a word for the
opposite of red baiting?


>>  I
>>don't think there's anything ad hoc about their assumptions or their
results.
>>Though of course you are right to point out that we need to be careful about
>>extending experimental results to other contexts.  I did not say otherwise;
>>nor has anyone else on this list.
>
>Aha! So you admit that their results are special cases--- that were set up
>in the context of a classroom -- but not necessarily applicable to the real
>world environment. Well now that's interesting---.
>

I'd say that about any results, analytical or empirical, orthodox or
dissenting, derived in a controlled setting. I thought that was just good
scientific practice. As Dubya said when he was campaigning: we got to be
humble.

>
>They are calling into question whether costs of production are relevant in
>producible goods mrkets, or liquidity is relevant in financial markets.  and
>if you can't see that, it is because you don't want to.

Um, did you ever consider the possibility that your arguments aren't
convincing?

Regards,

Gary