Is Homo Economicus a Psychopath? • Hacker News Board

Re: Is Homo Economicus a Psychopath?

#31

Post by Gimpei » Mon, Dec 22, 2014, 10:55 PM UTC

Symmetry wrote: post #14

jerf wrote: post #4

"Homo economicus, is a creature of coldly calculated selfishness, dispassionately maximizing its best interests even if that comes at the expense of others." For the second time today, I get to point out that in economics is neutral about "best interests" and is metaphorically happy to accommodate people whom consider happiness or other such "soft" things as part of their personal value function. If your definition o…

Exactly. The only assumptions that economics makes about people are that (1) people have different utility functions and (2) that they rationally pursue them. (1) is satisfied even if everybody is perfectly selfless just as much as if they're perfectly selfish, it's only if everybody was a perfect utilitarian that it would break down. (2) is much more tenuous but usually works well enough when you're dealing with lar…

They make a lot more assumptions than that, neoclassical economists at least. How do you think they manage to aggregate the preferences of millions of people to provide "microfoundations" to their models? See the aggregation problem on wikipedia.

Re: Is Homo Economicus a Psychopath?

#32

Post by cmdkeen » Mon, Dec 22, 2014, 11:17 PM UTC

jerf wrote: post #4

"Homo economicus, is a creature of coldly calculated selfishness, dispassionately maximizing its best interests even if that comes at the expense of others." For the second time today, I get to point out that in economics is neutral about "best interests" and is metaphorically happy to accommodate people whom consider happiness or other such "soft" things as part of their personal value function. If your definition o…

George Price created a mathematical theory that altruism works with game theory in evolutionary terms. In an attempt to prove the theory either way he adopted increasingly altruistic behaviour and become more religiously devout. He ended up broke having given away all his possessions, becoming depressed due to the number of times he was taken advantage of. He killed himself in 1975. His atheist colleague converted to Christianity.

There are plenty of ways to interpret the models that economists create - if the Price equation can model altruism in terms of game theory, you're perfectly correct that the definition of "best interests" is a variable.

Re: Is Homo Economicus a Psychopath?

#33

Post by DanDanDanDan » Mon, Dec 22, 2014, 11:21 PM UTC

jerf wrote: post #4

"Homo economicus, is a creature of coldly calculated selfishness, dispassionately maximizing its best interests even if that comes at the expense of others." For the second time today, I get to point out that in economics is neutral about "best interests" and is metaphorically happy to accommodate people whom consider happiness or other such "soft" things as part of their personal value function. If your definition o…

Most people do not take care of their family because they think it's in their best interests. They often take care of their family for myriad reasons--e.g. a moral call to selflessness, sociocultural norms, a sense of familial duty, love, etc. The language of "best interests" really doesn't fit here.

Taking care of an ailing parent is in no way connected to maximizing one's returns on anything (except maybe fulfilling a sense of what you "ought" to do).

Re: Is Homo Economicus a Psychopath?

#34

Post by cmdkeen » Mon, Dec 22, 2014, 11:25 PM UTC

AnimalMuppet wrote: post #16

jerf wrote: post #15

Earlier quoted context omitted.

You've touched on the strawman about HE, but you've misidentified the source. It is the Marxists that want you to believe the psychopath claim, in their desire to stereotype capitalism as blind greed. Good capitalists that understand economics will perfectly happily include happiness and such in the value functions they use, because it turns out economic theory stops functioning without that assumption; it's built in…

> You can not understand the anger about HE until you understand that Marxists desperately need humans to not behave "slightly irrationally under some circumstances" (the real scenario) but need humans to be profoundly irrational, so they can justify their handing over all sorts of power to the government so they can save everyone from themselves. You had me until that sentence. I don't think the Marxists need humans…

You mean Marxist-Leninists, Marxism in and of itself doesn't require violent revolution.

The real irony is that if governments are rational actors, and power is in their best interest, then the Leninist insistence on the need for proletariat dictatorship as a step to true Communism (where the government isn't needed) is undermined by the rationale that the government won't give up power.

Which is of course what has happened with every state that has tried it. Marxist Communism on a state level has never been reached, merely various forms of socialist dictatorship that claim to be working towards it.

Re: Is Homo Economicus a Psychopath?

#35

Post by enoch_r » Mon, Dec 22, 2014, 11:26 PM UTC

TheOtherHobbes wrote: post #24

enoch_r wrote: post #10

Earlier quoted context omitted.

You're responding to the claim that "classical economics does not actually assert that individual humans behave in a purely rational and fully-informed manner" with an argument that it is impossible for individual humans to behave in a purely rational and fully-informed manner. The only part of your comment that addresses the actual point of disagreement is "(Actually, classical economics does.)" As an aside, Keen's…

>"Rationality" does not require that one must perform a search through every possible permutation of items. And yet you - or someone, inevitably - is also going to claim that markets are somehow magically "efficient" precisely because they're capable of usefully approximating exactly this kind of optimisation. So which is it? Is "market efficiency" rational or not? As for the original claim - of course it's true. Any…

Imagine I argue that, to sort an array of n integers, I must ask myself "is this permutation the sorted array?" for every n! permutations of the integers. Thus it is obvious that humans cannot correctly sort a list of 100 numbers, because even if I could correctly determine whether a given array of 100 numbers is sorted in a single second, it would take 9.3 × 10^157 seconds to sort such an array.

This is clearly silly, because I ignore all the other algorithms for sorting such an array--I assume that the only available option is something comically inefficient. In just the same way, when Steve Keen argues that it's impossible that my purchases are rational because choosing rationally requires me to iterate through every possible bundle and select the best one, he is making big assumptions about the type of problem I face, the tools available, and the meaning of rationality.

> And yet you - or someone, inevitably - is also going to claim that markets are somehow magically "efficient" precisely because they're capable of usefully approximating exactly this kind of optimisation.

As others in this thread have explained, question of whether markets usefully approximate this kind of optimization is distinct from the question of whether individual people perform this optimization successfully. Deviations from efficient markets absolutely occur--the question is what my priors should be. The fact that, for example, it's extremely difficult to reliably identify and profit from financial market inefficiencies suggests that, in fact, markets really do behave astonishingly well, given all that we know about human irrationality.

Re: Is Homo Economicus a Psychopath?

#36

Post by Gimpei » Mon, Dec 22, 2014, 11:32 PM UTC

glenra wrote: post #5

A better question might be "Is Homo Economicus a Strawman?" To which the answer is: yes, it is. Classical economics does not actually assert that individual humans behave in a purely rational and fully-informed manner. A more accurate premise is that groups of humans tend on average to act at least somewhat as if they were rationally well-informed. We have tools to determine what "rational" behavior might look like a…

Economist here. You're right that "neoclassical economists" or rather macroeconomists assume self-interested behavior on average rather than at an individual level. Furthermore, most recognize that people do not typically behave in the manner posited by macroeconomic theory at an individual level. There's also a mountain of experimental evidence backing this up (see Kahneman for example). However, they don't provide any evidence for why the discrepancy in individual behavior averages out in aggregate, apart from it being "intuitive."

Actually, you don't have to be a behavioral economist to find the kind of assumptions needed for macroeconomic modeling pretty dubious. Modern Dynamic Stochastic General Equilibrium models typically take a couple of agents, multiply them by a million and call it consumer demand. The kind of assumptions needed to make this leap have nothing to do with greed and instead concern income distribution and the way it affects demand. It's called the aggregation problem if you're interested.

All of which is to say that the economics profession is by no means united on this question. Most microeconomists I know think that microfounded macro models are a joke. For this reason Cal Tech doesn't even teach macro anymore.

Re: Is Homo Economicus a Psychopath?

#37

Post by AnimalMuppet » Mon, Dec 22, 2014, 11:43 PM UTC

TheOtherHobbes wrote: post #24

enoch_r wrote: post #10

Earlier quoted context omitted.

You're responding to the claim that "classical economics does not actually assert that individual humans behave in a purely rational and fully-informed manner" with an argument that it is impossible for individual humans to behave in a purely rational and fully-informed manner. The only part of your comment that addresses the actual point of disagreement is "(Actually, classical economics does.)" As an aside, Keen's…

>"Rationality" does not require that one must perform a search through every possible permutation of items. And yet you - or someone, inevitably - is also going to claim that markets are somehow magically "efficient" precisely because they're capable of usefully approximating exactly this kind of optimisation. So which is it? Is "market efficiency" rational or not? As for the original claim - of course it's true. Any…

> >"Rationality" does not require that one must perform a search through every possible permutation of items.

> And yet you - or someone, inevitably - is also going to claim that markets are somehow magically "efficient" precisely because they're capable of usefully approximating exactly this kind of optimisation.

I don't see the problem. To me, it seems perfectly reasonable to say that people (and the market) can usefully approximate the optimization in question, and therefore do not have to search through every possible permutation. That is, I see no contradiction between your quote from the GP, and the efficient market hypothesis (at least, the EMH as a useful approximation).

Re: Is Homo Economicus a Psychopath?

#38

Post by clairity » Mon, Dec 22, 2014, 11:46 PM UTC

jerf wrote: post #4

"Homo economicus, is a creature of coldly calculated selfishness, dispassionately maximizing its best interests even if that comes at the expense of others." For the second time today, I get to point out that in economics is neutral about "best interests" and is metaphorically happy to accommodate people whom consider happiness or other such "soft" things as part of their personal value function. If your definition o…

economists (particularly of the capitalist variety) certainly have a point of view that the economic utility function can be directly transformed into and represented by monetary value. literally the point of the utility function is to represent behavioral preferences with a number, which can then be calculated on. by turning decisions into math, this transformation has the effect of shielding rational actors from the emotional consequences of their actions.

for example, this is why an interaction with a large (inter-)national bank is often very different from the local credit union. a credit union may give you a break on fees or on check clearing times because they see you standing in front of them in need and they're sympathetic to your situation, but at a major bank, policy decisions are made in private offices far from contact with everyday customers and are simplified into a cold hard calculation about how much profit can be extracted from you.

also i'd posit that not only are humans sometimes not rational, but that humans are commonly irrational. rationality derives from a useful simplification of the world that helped us survive against bigger, faster & stronger animals. we've stretched rationality marvelously to make it a useful model of a wide range of relatively simpler macro-phenomena. but it's a poor model for complex actors like people, who exhibit a much wider degree of freedom and range of action. rationality necessarily assumes that a single best choice can be made in any situation (rarely, two or more choices might be equivalently good but that's not relevant here) and that all relevant factors can be incorporated into that single decision. this is almost never the case in real life, except maybe in the problem sets assigned in school.

it's as likely that a rational model is designed to coincide with the center of a distribution of decisions made by real people, as it is that the model has explanatory power about that distribution. people are incorporating an astonishingly vast array of information in their decision-making that is very unlikely to be considered by a rational economic model, so those "astonishing bullshit reasons" shouldn't be so surprising really if you don't conflate the modeled behavior of the population with that of the individuals.

Re: Is Homo Economicus a Psychopath?

#39

Post by AnimalMuppet » Mon, Dec 22, 2014, 11:56 PM UTC

joshjkim wrote: post #19

This reminds of a thought I had a few months ago: how have there not been more thought pieces relating Uber-the-business's recent/relentless PR-debacles to Nietzsche's Ubermensch concept? I guess I'll give it a go. Uber/Travis and his execs seem to demonstrate the belief that they are "overmen" in that they seem to believe that they transcend the rules of society and are destined to shape society and its values rathe…

> Note on Nietzche: In Thus Spake Zarathrusa, the "uberman" concept is (maybe) considered a positive that humanity should work towards in the absence of belief in God, and I think it can still be understood as such.

The problem is that, in the absence of God, there is no absolute morality that is not the result of an arbitrary choice. When the "uberman" arises, he/she creates a new morality, which is needed in the morally nihilistic vacuum that arises due to the absence of God. But because there is no objective basis for morality in the absence of God, that means that the new morality is the result of the "uberman's" arbitrary choice. Is that going to be the magic spark that leads us into a golden age? Only if we get very, very lucky in the "uberman's" arbitrary choice.

Re: Is Homo Economicus a Psychopath?

#40

Post by alexbecker » Mon, Dec 22, 2014, 11:56 PM UTC

DanDanDanDan wrote: post #33

jerf wrote: post #4

"Homo economicus, is a creature of coldly calculated selfishness, dispassionately maximizing its best interests even if that comes at the expense of others." For the second time today, I get to point out that in economics is neutral about "best interests" and is metaphorically happy to accommodate people whom consider happiness or other such "soft" things as part of their personal value function. If your definition o…

Most people do not take care of their family because they think it's in their best interests. They often take care of their family for myriad reasons--e.g. a moral call to selflessness, sociocultural norms, a sense of familial duty, love, etc. The language of "best interests" really doesn't fit here. Taking care of an ailing parent is in no way connected to maximizing one's returns on anything (except maybe fulfillin…

You're missing his point. "Interests" is a technical term in economics which means something different from the common usage. In short, it means things you consciously seek for their own value. Love, being moral, fulfilling duties; all of these are interests in the sense economists use the term.

NB: Economists largely study specifically monetary interest because it's something they can measure. A number of criticisms can be made about this, but there isn't a good alternative.