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Things Economists Agree On

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Re: Things Economists Agree On

#41

Post by pedanticfreak »

I am not an economist, but I think economists have been doing a lot of catch up lately. Traditional economists have tended to see people as rational agents, whereas more recent behavioral economists are showing how people are pretty universally irrational.

Sure, in an idealized economic simulation we would consider every possibility and only choose the most optimal one. It only stands to reason in such an environment we should remove barriers and maximize choice. But the reality is people are limited and take shortcuts in decision making that traditional economists never even imagined. Those human cognitive limitations need to be seriously considered before jumping to any conclusions about economic policy.

Re: Things Economists Agree On

#42

Post by mdda »

sliverstorm wrote: post #3
amattn wrote: post #2

The classic response is "nothing". That being said, getting 4 out of 5 economists to agree on something doesn't mean it's right. Most economists will tell you that public policy works best when you have the capability/political will to iterate on solutions. Not unlike a startup really.

I was shocked when I didn't get an empty white page.

That's because the media loves an argument, and politicians love lobbyists...

When most economists see a debate between 'experts' on CNN (or Fox) I'm sure they're shaking their heads and sighing.

Imagine seeing a debate on TV about the merits of Java vs Windows - with the two experts being marketing people from Oracle and Microsoft. The whole thing would be a facepalm for HN readers - except that to an outsider, it would sound like a clash of brilliant minds.

Re: Things Economists Agree On

#43

Post by DaniFong »

_delirium wrote: post #19
splat wrote: post #15

I find it rather strange that even predictions that should be fairly clear-cut and straightforward (e.g. "A ceiling on rents reduces the quantity and quality of housing available.") only get around 9/10 agreement. As a non-economist, I would have thought that a seemingly simple (and testable!) question like that would be like polling physicsts with the question "Does F = ma?". And I would sure hope that more than 93%…

Well, unlike with physical laws, economic "laws" rarely describe direct causal mechanisms, but rather generalizations about what happens when you poke a multi-agent system, whose behavior is often rather complex. It's hard to test, tests often throw up quirks, it's nearly impossible to control for all confounding variables, etc. In the rent-control case, for example, here is one (paywalled and somewhat dated) dissent…

Indeed. In particular, I've noticed that nearly all of the cities I've lived in and love (SF, Berkeley, NYC, Montreal) have rent control, whereas many cities that don't have rent control (Dallas, Houston, Phoenix) I've really had no interest in visiting.

The historical justification of rent control is that it allows for security of tenure: hence, even renters can put down roots, and a community can have time to develop. The communities I love seem to have required more time to develop than the cycles of the real estate market would allow. Even if I personally pay more rent, I benefit from those communities.

How do the economists model that? They probably don't. They do answer one question: the housing stock in Dallas and Houston is dramatically more affordable and probably built to a higher standard than the equivalent in SF and NYC, but the quality of life is significantly different (to my personal tastes, sacrificed.) The economists are answering the wrong question.

Rent control does seem to create quite an affordable housing shortage, though. One wonders, however, if ultimately it spurs on a lot of upscale development, since the premium you can charge for new units is so much higher, relatively. (giving you SF's South Beach...)

Edit:

Cato's article on the subject describes the change of Boston and Cambridge from a rent controlled to a free market system, on January 1, 1997.

http://www.cato.org/pubs/pas/pa-274.html

Can anyone describe the change in vibe from before January 1, 1997 to now?

Re: Things Economists Agree On

#44

Post by mdda »

pedanticfreak wrote: post #41

I am not an economist, but I think economists have been doing a lot of catch up lately. Traditional economists have tended to see people as rational agents, whereas more recent behavioral economists are showing how people are pretty universally irrational. Sure, in an idealized economic simulation we would consider every possibility and only choose the most optimal one. It only stands to reason in such an environment…

But economists would all agree that the models have limitations - that's not really news. The news here is that the limitations are a 10% slice rather than a 1% slice.

But that doesn't stop the theory being 90% correct.

Incentives-wise : is it easier to get people to buy a book about 'classical economics' or the 'whole new type of economics that makes those classical guys look like dinosaurs'?

Re: Things Economists Agree On

#45

Post by scrod »

dstorrs wrote: post #30
kiujhgbnj wrote: post #24

Interesting that all economists seem to be pro-business, anti-tax, anti-worker rights. You would almost think that most economists worked at banks or for university business schools. In other research naval officers believe in a larger navy with lots of ships

Yep, many economists do work for those institutions. And yep, all of them have /some/ particular axe to grind (everyone does -- I do, you do, etc). That doesn't mean that what they're saying isn't correct. - Businesses are, in fact, what generates most of the wealth and innovation in a country - Taxes, whether personal or corporate, are not economically efficient. Government can be compared to an electrical grid -- t…

>When it means instead "give us the power to force you to comply with stupid and inefficient rules about who can do what" (e.g. most modern union shops that I've encountered), that's bad for society.

You've somehow managed to bring two logical fallacies in the same sentence — the straw man and the false dichotomy. No one genuinely struggling for the rights of workers ever advocates for either of those ways, and those outcomes aren't by any means the only possible alternatives.

The purpose of unions has always been to bargain collectively in situations where individual actions alone would result in a greater detriment to each worker. A corporation is by nature this same mechanism applied in the market, so which side you prefer — the worker or the owner — is fundamentally one of politics in the end.

Re: Things Economists Agree On

#46

Post by [deleted] »

joelmichael wrote: post #38
splat wrote: post #15

I find it rather strange that even predictions that should be fairly clear-cut and straightforward (e.g. "A ceiling on rents reduces the quantity and quality of housing available.") only get around 9/10 agreement. As a non-economist, I would have thought that a seemingly simple (and testable!) question like that would be like polling physicsts with the question "Does F = ma?". And I would sure hope that more than 93%…

There are people who think the Earth is flat, but they aren't called physicists; yet Marxists are still called economists.

[deleted]

Re: Things Economists Agree On

#47

Post by [deleted] »

pedanticfreak wrote: post #41

I am not an economist, but I think economists have been doing a lot of catch up lately. Traditional economists have tended to see people as rational agents, whereas more recent behavioral economists are showing how people are pretty universally irrational. Sure, in an idealized economic simulation we would consider every possibility and only choose the most optimal one. It only stands to reason in such an environment…

[deleted]

Re: Things Economists Agree On

#48

Post by metamemetics »

sliverstorm wrote: post #4

I'm curious about the "Eliminate Agriculture Subsidies" one. I don't know enough to give a good opinion, but it seems to me like that could wind up pricing basic, quality food out of the hands of the poorest people, and they'd either have problems with starvation or be forced to eat junk. I mean, maybe I'm wrong, but I could have sworn it was The Man that is keeping eggs down at around $3/dozen and milk around $4/gal…

An additional problem with subsidies is the detrimant to international trade.

For example, massive subsidies make corn in America TOO cheap, that everyone in Mexico City buys American corn! Yet comparative advantage would say Mexico, with a higher proportion of unskilled laborers, should be able to put corn on the marketplace in their own country cheaper, and build up their economy.

Subsidizing exportable domestic goods has similar negative effects to tariffing imports.

Re: Things Economists Agree On

#49

Post by scrod »

astine wrote: post #27
kiujhgbnj wrote: post #24

Interesting that all economists seem to be pro-business, anti-tax, anti-worker rights. You would almost think that most economists worked at banks or for university business schools. In other research naval officers believe in a larger navy with lots of ships

You might think that economistshold pro-business, anti-tax, anti-worker rights biases. Or you might think that the more easily demonstrated principles of economics hold pro-business, anti-tax, anti-worker rights biases. Given my limited studies of history and economics, I'd suggest the later.

If only we could discover a series of rules that would explain how perfectly self-interested robots behaved in a fictional market with no government/community interference in business on behalf of workers, where capital could be employed as a wealth-yielding instrument purely in and of itself, and where property gained from the proceeds of such was protected by the threat of violence. Surely then we could use those fundamental rules to help us predict how an ideal society should function. And I say ideal because clearly my preferred set of premises were definitely not chosen as a convenient rationalization for maintaining a pre-existing social structure that enabled the effective subjugation of most of society by a minority owner class.

Re: Things Economists Agree On

#50

Post by pedanticfreak »

mdda wrote: post #44
pedanticfreak wrote: post #41

I am not an economist, but I think economists have been doing a lot of catch up lately. Traditional economists have tended to see people as rational agents, whereas more recent behavioral economists are showing how people are pretty universally irrational. Sure, in an idealized economic simulation we would consider every possibility and only choose the most optimal one. It only stands to reason in such an environment…

But economists would all agree that the models have limitations - that's not really news. The news here is that the limitations are a 10% slice rather than a 1% slice. But that doesn't stop the theory being 90% correct. Incentives-wise : is it easier to get people to buy a book about 'classical economics' or the 'whole new type of economics that makes those classical guys look like dinosaurs'?

I would liken it more to elaborate geocentric models of the solar system. Sure, they can explain the data. And they can make accurate predictions within a certain margin of error.

But then there are the cases they can't explain or predict accurately. Not to mention they keep getting more complex and more uncomfortable to believe. At the end of the day it's just the completely wrong idea tortured to give the right answers. The solar system was heliocentric all along.

That's the kind of place I think traditional economic models are in right now. We're steps away from proving out the planets orbit the Sun, but there are still a lot of smart people writing elaborate dissertations about the Sun orbiting the Earth.

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