Foundations of Complexity Economics • Hacker News Board

Re: Foundations of Complexity Economics

#21

Post by notahacker » Sat, Apr 17, 2021, 9:28 AM UTC

snidane wrote: post #14

My gripe with all schools of economics is how real estate/land market is completely abstracted away. Even though it is the largest financial market of them all, with everyone except homeless involved. In mainstream economics it is treated as just another good, such as break or milk, but somehow it behaves differently. The dynamics of the market are driven by monopoly pricing and mortgage and rent are paid more like a…

> My gripe with all schools of economics is how real estate/land market is completely abstracted away

Your gripe with "all schools" of economics is a straw man then. Land (and the wider concept of rent) features in an enormous number of economic models, from externalities to explicitly location-based theories like Hotelling's Location Model to Keynes' desire for macroeconomic policy to "euthanize the rentier". Ricardo didn't propose a "housing cycle"; claims (good and bad) made about real estate markets and the economy are all the work of economists writing a very long time afterwards.

And Ricardo's concept of economic rent is one of the first things you learn as an undergraduate. It's just it's applied to non-land factors of production and products with inelastic supply curves now too.

Since we're no longer living in an primarily agricultural/mining society, the Ricardian notion that most of the fruits of all economic progress accrue to large scale landowners isn't a particularly realistic one. You could have made a lot of money investing in Bay Area real estate in the nineties, but an order of magnitude or three more investing in the tech companies whose growth made Bay Area real estate more valuable.

Re: Foundations of Complexity Economics

#22

Post by mkl » Sat, Apr 17, 2021, 9:35 AM UTC

ttty wrote: post #15

Complexity economics sees the economy as not necessarily in equilibrium, its decision makers (or agents) as not super-rational, the problems they face as not being well-defined. The economy becomes something not given and existing but constantly forming from a developing set of actions, strategies and beliefs. For past 150 years, economic theory has viewed economy as an evolving complex system, and out of this explor…

Junk comment automatically generated from the article.

Re: Foundations of Complexity Economics

#23

Post by [deleted] » Sat, Apr 17, 2021, 10:23 AM UTC

belZaah wrote: post #11

zwaps wrote: post #2

Curious article. Certainly builds a strong straw man. First sentence "For the past 150 years, economic theory has viewed agents in the economy (firms, consumers, investors) as perfectly rational decision makers facing well-defined problems and arriving at optimal behavior consistent with — in equilibrium with — the outcome caused by this behaviour." The formal definition of rational actor is not nearly 150 years old.…

> "Complexity economics", in form of dynamic systems and chaos theory (for example) had its time in the sun, since the 70's actually, without leading to convincing new insights This is really interesting. The system dynamics folks at the MIT would probably disagree. The extent to which dynamic systems explains outcomes of fluctuating forces in the economy is certainly useful. That said, SD has a communication problem…

[deleted]

Re: Foundations of Complexity Economics

#24

Post by dash2 » Sat, Apr 17, 2021, 10:33 AM UTC

gryn wrote: post #13

zwaps wrote: post #2

Curious article. Certainly builds a strong straw man. First sentence "For the past 150 years, economic theory has viewed agents in the economy (firms, consumers, investors) as perfectly rational decision makers facing well-defined problems and arriving at optimal behavior consistent with — in equilibrium with — the outcome caused by this behaviour." The formal definition of rational actor is not nearly 150 years old.…

what would you consider to be 'Economics the good part' as of today ? because as an outsider who's interested in learning more there seems to be a lot of alchemy going in the field.

Here's a few:

- the "credibility revolution" in econometrics, with its laser focus on good research design to uncover causality

- the rise of randomized controlled trials in development economics, discovering "what works" to help the poor

- behavioural economics, a bit long in the tooth now, but still with enough insights to support a lot of government Nudge Units

- Thomas Piketty and his coauthors' long work at building a sound evidence basis on inequality

- auction theory, which helped make the UK government several billion GBP in designing spectrum auctions

- new work bringing rigour to economic history, and often giving precise answers to questions like the effect of Protestantism on economic development

None of these are perfect but all are interesting. I haven't mentioned macro because I don't know enough to talk about it.

Re: Foundations of Complexity Economics

#25

Post by jaygernaught » Sat, Apr 17, 2021, 11:05 AM UTC

Iv wrote: post #20

jaygernaught wrote: post #17

people on this thread seem really aggressive. so go easy on me. But I've started to wonder about economic value. to an individual like myself the only real value(outside eating every day) is new experiences/skills or learning new things(out of a theoretical matrix of total available things). I feel like that is probably true for everyone. It would seem to be the source of the jealousy that relative wealth engenders.…

A science goes much faster when you have objective observations and measurable quantities. That is the only reason why economists are so focused on prices, GDP, incomes. It would be great to have objective measures of happiness, satisfaction, enjoyment. Some people are actually pursuing attempts in that direction for instance look [1] Thing is, prices are a proxy of that. If you earn 30 USD an hour, then being ready…

Very interesting. I still have this niggling belief that things like price and utility should be able to be derived from a fundamental matrix of possible unique activities and learnings and there collapse into actions or learnings enacted. I don't know enough mathematics or economics to even start to model it, though I did watch the khan academy on eigenvalues, lol. but building it as a computational model in the way described in the article seems way more accessible to me. I might look for some code.

Re: Foundations of Complexity Economics

#26

Post by zwaps » Sat, Apr 17, 2021, 11:12 AM UTC

FabiansMustDie wrote: post #9

zwaps wrote: post #2

Curious article. Certainly builds a strong straw man. First sentence "For the past 150 years, economic theory has viewed agents in the economy (firms, consumers, investors) as perfectly rational decision makers facing well-defined problems and arriving at optimal behavior consistent with — in equilibrium with — the outcome caused by this behaviour." The formal definition of rational actor is not nearly 150 years old.…

I feel a take that takes apart a whole comprehensive notion, one that is sure to have many rough edges, is nitpicky and worth little. So, I will try to address your points (for my own benefit), and then---perhaps---lead into a more worthwhile discussion. > The formal definition of rational actor is not nearly 150 years old. It's heyday was probably in the time of Becker, in the 70's. The study of equilibrium refineme…

Well it’s hard to say, really.

The statement he leads his paper with is clearly wrong if read literally. Others follow that are simply not fully correct or intellectually honest.

The overall history includes the works of scholars who have shaped the field, be it 150 years ago or 50 years ago and at least, were influential. I am clearly still missing the point, but I can not see any way to read this sentence in a way that would be correct.

Are the scholars mentioned as counter examples and the people who draw upon them to tackle their research not doing research in the field? What are they doing, then? What have they been doing for the last 60 years? I specifically take issue with eliminating people like Jim March, who has thought very deeply about rationality and actual human behavior in the context of complex systems aka organizations.

Or see it from my view: I have published work with Agent Based complex models, interdisciplinary work with psychologists, sociologists and mathematicians, that should be looked upon favorably by the author of this article. Am I doing complexity economics in the sense of the author now?

Because the academic lineage I draw upon includes (though not exclusively) a good amount of economists that the author so malignes. And not obscure ones either!

It seems like the author wants to co opt the many exciting ideas in economic theory and approach that are still ongoing - but in reality they also have been ongoing for decades, in parallel to what he sees as economics.

If the author sees himself part of this scientific conversation, why not represent it fairly? I know one has to frame a paper like this against something, but this is just overdone.

Re: Foundations of Complexity Economics

#27

Post by zwaps » Sat, Apr 17, 2021, 11:26 AM UTC

belZaah wrote: post #11

zwaps wrote: post #2

Curious article. Certainly builds a strong straw man. First sentence "For the past 150 years, economic theory has viewed agents in the economy (firms, consumers, investors) as perfectly rational decision makers facing well-defined problems and arriving at optimal behavior consistent with — in equilibrium with — the outcome caused by this behaviour." The formal definition of rational actor is not nearly 150 years old.…

> "Complexity economics", in form of dynamic systems and chaos theory (for example) had its time in the sun, since the 70's actually, without leading to convincing new insights This is really interesting. The system dynamics folks at the MIT would probably disagree. The extent to which dynamic systems explains outcomes of fluctuating forces in the economy is certainly useful. That said, SD has a communication problem…

Could you give an example of thoughts, approaches or papers from system dynamics that you consider most significant? Perhaps it is more of a macro thing?

Re: Foundations of Complexity Economics

#28

Post by zwaps » Sat, Apr 17, 2021, 11:31 AM UTC

jaygernaught wrote: post #25

Iv wrote: post #20

Earlier quoted context omitted.

A science goes much faster when you have objective observations and measurable quantities. That is the only reason why economists are so focused on prices, GDP, incomes. It would be great to have objective measures of happiness, satisfaction, enjoyment. Some people are actually pursuing attempts in that direction for instance look [1] Thing is, prices are a proxy of that. If you earn 30 USD an hour, then being ready…

Very interesting. I still have this niggling belief that things like price and utility should be able to be derived from a fundamental matrix of possible unique activities and learnings and there collapse into actions or learnings enacted. I don't know enough mathematics or economics to even start to model it, though I did watch the khan academy on eigenvalues, lol. but building it as a computational model in the way…

The most convincing description of utility is as a representation of ranked choices or preferences.

Perhaps it’ll be an interesting exercise to think about two experiments, one asking for valuations of things, and one asking whether one thing is preferred above the other.

Then, consider how these outcomes may be related!

Re: Foundations of Complexity Economics

#29

Post by imtringued » Sat, Apr 17, 2021, 12:31 PM UTC

nabla9 wrote: post #19

snidane wrote: post #14

My gripe with all schools of economics is how real estate/land market is completely abstracted away. Even though it is the largest financial market of them all, with everyone except homeless involved. In mainstream economics it is treated as just another good, such as break or milk, but somehow it behaves differently. The dynamics of the market are driven by monopoly pricing and mortgage and rent are paid more like a…

> My gripe with all schools of economics i Then you don't know much about mainstream economics. Don't learn economics from news, pundits or other shallow sources. (1) Mainstream Economists strongly agree with you with large consensus. Yes there is consensus among mainstream economists about land/property. (2) They have a solution and they agree even on that. Property tax is considered the least harmful tax because it…

Yes, those pesky people. They love their counterproductive systems, they love it when things are unfair.

Americans deny climate change for the benefit of special interests, after all, investing into fighting climate change would raise the total investment rate and help every single citizen and this isn't even counting the economic damage that climate change causes, just the macroeconomic benefits of having an intact economy. You don't even need an ideological reason.

Republicans are against Biden's infrastructure bill, even though it would raise the total investment rate and thus help every American citizen, including Republican voters.

Californians introduced Prop 13 statewide meaning every Californian city will become dysfunctional over decades. It's a government mandated prisoners dilemma. Rent control also has a prisoners dilemma effect. Rent control favors existing residents that don't move over existing and future residents that do move. People leave tier 1 cities because market rate housing is now market rate + lost revenue from rent control. Some immigrant families don't mind living in tiny apartments, highly skilled workers don't mind sharing an apartment with room mates so they keep coming anyway. What happens is that everyone goes to tier 2 cities, who then promptly instate rent control and then the whole thing repeats with tier 3, tier 4, etc until the entire state is expensive.

The truth is that if you had let the tier 1 cities become expensive and let them build high rises everywhere they could have absorbed all the rich people. Yes, tier 1 city might be considered "undesirable" by former residents, but tier 2 city would still be affordable. Over time things would have fixed themselves. As it is right now, people who are being kicked out of tier 1 cities don't even have a tier 2 city to go to anymore, they just leave California for good.

Re: Foundations of Complexity Economics

#30

Post by beaconstudios » Sat, Apr 17, 2021, 1:28 PM UTC

zwaps wrote: post #2

Curious article. Certainly builds a strong straw man. First sentence "For the past 150 years, economic theory has viewed agents in the economy (firms, consumers, investors) as perfectly rational decision makers facing well-defined problems and arriving at optimal behavior consistent with — in equilibrium with — the outcome caused by this behaviour." The formal definition of rational actor is not nearly 150 years old.…

I have very little exposure to economic theory but quite a bit of exposure to complexity science. I took a look into the innovations you mentioned and it seems like nudge theory has its roots in cybernetics. Doesn't that inherently make it part of complexity economics? Cybernetics and systems theory are two sides of the same coin.

The examples cited in the Wikipedia article do also appear to be clear examples of cybernetic governance, so it would appear less that nudge theory is influenced by cybernetics and more that it is just a form of cybernetic praxis.