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The Prize in Economic Sciences 2017

nobelprize.org

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Re: The Prize in Economic Sciences 2017

#61

Post by nickik »

sjg007 wrote: post #59

Haven’t read this but if individuals aren’t economically rational, is the collective group? Or because we are organied in a hierarchy of decision makers (e.g. companies) are we always irrational?

There is a lot of research that tries to figure out how things actually work even if you assume irrational humans (or collectives).

https://en.wikipedia.org/wiki/Institutional_economics

You can do the same thing with business. They are also not purely rational but the market causes those to die who are to irrational.

Re: The Prize in Economic Sciences 2017

#63

Post by bluetwo »

nickik wrote: post #60

Honestly, I really don't really like this pick. Behavioral economics is extremely popular, especially outside economists themselves. But the problem is that it keeps repeating the same findings. We get it, people are not rational. You can read 150 year old economics books that mention these things. There is a 'behavioral economics' movement every 40 year. The research that I find 100x more interesting is the research…

"Limited rationality" not "highly irrational".

The traditional economic view is people act in their own self-interest. I would summarize this research by saying people act in their own perceived self-interest. Lots of times the two align, but there are cases when they don't, which I do find interesting and worthy of research.

Re: The Prize in Economic Sciences 2017

#64

Post by matt4077 »

eradicatethots wrote: post #53
FabHK wrote: post #50

Earlier quoted context omitted.

Absolutely. And of course, Kahneman and Tversky and Thaler didn't get a Nobel price for saying, "oh, hey, listen guys, actually sometimes people don't follow our standard 'homo economicus' rationality assumptions", but to study these deviations carefully (empirically and theoretically) and note when they're important and put them into a coherent framework with some predictive power (aka, a theory). On a side note, th…

I’m not sure how your second paragraph is relevant, but could you say more?

The Chicago School is the subset of economics roughly equivalent to what you think about when I say "supply-side, trickle-down, Republicans, poor people need to get off the couch".

They were showing how these ideas were misunderstood not just by their opponents, but also by their fans.

That part of the political spectrum has added, for example, Ayn Rand's philosophy ("greed is good"), and arrived at a rather nihilistic place where no concept, idea, institution, or emotion that isn't exclusively a "market" is denied to even exist. That's how you get people saying "taxation is theft".

Re: The Prize in Economic Sciences 2017

#65

Post by soVeryTired »

bambax wrote: post #18

An irrational thing Amazon knows and many, many other online sellers don't: people don't want to pay for delivery. That is, they'd much rather pay $20 total with free delivery, than, for example, $15 for the goods + $3 for delivery. It's amazing the number of non-Amazon online shops who still don't seem to know this.

Domino's pizza does the same thing. Free delivery but massive discounts on collection.

Re: The Prize in Economic Sciences 2017

#66

Post by abecedarius »

option_greek wrote: post #9

I always wondered if Satoshi was not anonymous, whether he would have been nominated for Economic nobel. Of course, most of the ideas were pre-existing but he did put together the final pieces. But then he could very well be behind bars now based on how the story unfolded.

It'd be kind of wasted on a billionaire. Maybe someday he'll endow an annual Satoshi Prize in Being Awesome.

Re: The Prize in Economic Sciences 2017

#67

Post by puranjay »

ekianjo wrote: post #37
bambax wrote: post #18

An irrational thing Amazon knows and many, many other online sellers don't: people don't want to pay for delivery. That is, they'd much rather pay $20 total with free delivery, than, for example, $15 for the goods + $3 for delivery. It's amazing the number of non-Amazon online shops who still don't seem to know this.

> $15 for the goods + $3 for delivery. It's more simple than that: most people, me included, hate to see the price change just before you press the ordering button, just because shipping fees were not included. What Amazon does well is that it tells you exactly how much you will be billed from the get go (even when you have to pay for shipping, it's not hidden.)

As an amateur dabbler in conversion rate optimization, it's stunning what disclosing shipping policies upfront does to conversion rates.

I've seen cart abandonment drop by 50% or more simply by including shipping price and policies on the pricing page.

People will spend $20 extra to hit the $50 minimum free shipping threshold than spend $5 on shipping for a $30 order.

(Keeping low cost, high utility items in stock and available near checkout is highly recommended. For one fashion retailer, showing a bunch of socks and undergarments under 'recommendations' for orders below the free shipping threshold dramatically increased conversion rate. Everyone needs extra socks. If you've bought a $45 pair of jeans, adding a $5 pair of socks to hit the free shipping limit is "rational" for most people)

Re: The Prize in Economic Sciences 2017

#68

Post by nousilias »

ekianjo wrote: post #36
KingMob wrote: post #21

While I love the behavioral economists (esp. Kahnemann and Tversky), a lot of psychologists have told economists for a long time that assuming basic rationality as a starting point was a fundamental error in the field. Taking it as an axiom has led to all sorts of misguided efforts and wasted time. From the article: "That's the point: It's obvious to anyone who pays any attention at all to himself or his fellow human…

Because you don't need to go to the individual level to explain the behavior of crowds. That's like saying "hey, you don't know how quarks actually work in an atom, so how can you claim to understand physics at the macroscopic level?". That kind of argument does not hold very well.

I think part of what the OP is intimating at is that this prize is for something that had been well-established for some time in other ways. It's kind of like giving a Nobel Prize to a physical chemist for demonstrating that subatomic particles exist, using chemistry paradigms, when physicists had been studying quarks and leptons and whatnot already for years.

Showing how this plays out in economics is important; I don't want to downplay the significance of the work from that perspective. But it feels a little bit like giving a prize for discovering something that an entire field had known about for some time. I think it says as much, if not more, about the social dynamics of science as it does about the phenomena being studied.

I agree completely that the micro and macro level phenomena are not the same, but in this case the chasm isn't that great.

Re: The Prize in Economic Sciences 2017

#69

Post by ghaff »

puranjay wrote: post #67
ekianjo wrote: post #37

Earlier quoted context omitted.

> $15 for the goods + $3 for delivery. It's more simple than that: most people, me included, hate to see the price change just before you press the ordering button, just because shipping fees were not included. What Amazon does well is that it tells you exactly how much you will be billed from the get go (even when you have to pay for shipping, it's not hidden.)

As an amateur dabbler in conversion rate optimization, it's stunning what disclosing shipping policies upfront does to conversion rates. I've seen cart abandonment drop by 50% or more simply by including shipping price and policies on the pricing page. People will spend $20 extra to hit the $50 minimum free shipping threshold than spend $5 on shipping for a $30 order. (Keeping low cost, high utility items in stock an…

>I've seen cart abandonment drop by 50% or more simply by including shipping price and policies on the pricing page.

To be fair I assume that some number of people never start shopping because they don't like the shipping policies.

That said, people have gotten conditioned with a lot of "free" shipping or free shipping over a certain amount. So when they hit final checkout and are presented with what seems to be expensive shipping, they'll often almost reflexively close the page.

>People will spend $20 extra to hit the $50 minimum free shipping threshold than spend $5 on shipping for a $30 order.

Raises hand :-) I think the shipping charge feels like throwing money away. Whereas adding the item feels like "Surely I can find some item I want at effectively a 25% discount." But, yeah, most of this isn't economically rational. It was all very eye-opening when I was first exposed to this sort of thing 30 years ago and it's been useful in a lot of contexts.

Re: The Prize in Economic Sciences 2017

#70

Post by KingMob »

pcarolan wrote: post #32
KingMob wrote: post #21

While I love the behavioral economists (esp. Kahnemann and Tversky), a lot of psychologists have told economists for a long time that assuming basic rationality as a starting point was a fundamental error in the field. Taking it as an axiom has led to all sorts of misguided efforts and wasted time. From the article: "That's the point: It's obvious to anyone who pays any attention at all to himself or his fellow human…

Physicists assume things are spheres and use that to solve a bunch of problems. It's important to know 'why' economists use this abstraction for modeling before patently dismissing it. Economists notice that on average, people in the aggregate tend to behave rationally sometimes. Scrutiny should be applied to the assumptions, but it can still help explain economic systems.

Your point is good, but it's important to understand the differences in attitudes between them. Physics as a discipline seeks evidence and theories with greater explanatory power. Economics as a discipline seems content to favor modeling over data.

Both have useful abstractions and simplifications, but only one stops short of further investigation.

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