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  1. #11
    The Eighth Colour Octarine's Avatar
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    Quote Originally Posted by Lark View Post
    There's some stuff I understand less well but its essential to the scuppering of price calculation theories and theorising about demand and supply, which is major because it was the calculation debate which was supposed to be the intellectual rocks upon which socialism was wrecked. The essential crux of the issue is that those are not independent variables, so drops in price to do not always occasion rises in demand, in fact sometimes drops in price make things less desirable, there is a bit about an idea of "anchoring" which is a process were by people arrive at what they consider are reasonable or expected prices to begin with and judge variations from there.
    The market works in mysterious ways.

    Seriously though, the market need not be proven to be ideal, it only needs to be proven to be superior to the alternative. The key about the economic calculation problem is that for effective computation, there needs to be an effective network between the nodes (OK, individuals), allowing for complex information processing structure to emerge. So far, a market has show to be the most effective way of achieving this. Although price based information flow need not be the only way of achieving this.

    The problem with synthetic price calculation theories, regardless of the sophistication of the underlying behavioural assumptions is that they are useless at actually predicting prices unless they are embedded in the economic network itself.

    We need not however put up our hands like the Austrain economists and claim that the modelling of these networks is too difficult to do realistically and should not be done.

  2. #12
    Senior Member Survive & Stay Free's Avatar
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    Quote Originally Posted by Catbert View Post
    Seriously though, the market need not be proven to be ideal, it only needs to be proven to be superior to the alternative.
    Well, that is a good point, although far, far short of the promises which are made for it or hopes which are invested in it.

    The point of the author I mentioned earlier in the thread about markets was that they are particularly ill suited to the delivery of certain things where the naive psychological assumptions underpinning calculation theories fail the most. The two responses to that I've heard tend to be either that the system is perfect, the people participating in it are flawed (which I think is a poor point when its made with regard to capitalism, socialism or any other economic paradigm because economies are supposed to be of service, not the opposite) or the analysis pointing up the flawed "naive psychological models" is itself flawed, ie people are not irrational, they just dont abide by "your rationale". The second point is a better one but both are disatisfying to me personally and just fall within the remit of pro or anti-state policy or pundit's arguments.

    @Zarathustra that was a very interesting rep. you should participate in the thread.

  3. #13
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    Quote Originally Posted by Lark View Post
    @Zarathustra that was a very interesting rep. you should participate in the thread.
    Ok.

    Quote Originally Posted by pure_mercury View Post
    There are no contradictions between the findings of behavioral economists and libertarian economic philosophy. Free market economists do not need to rely on the assumption of perfectly rational actors. So. . . yeah.
    This.

    Quote Originally Posted by Catbert View Post
    Seriously though, the market need not be proven to be ideal, it only needs to be proven to be superior to the alternative.
    And this.

    Quote Originally Posted by Lark View Post
    Well, that is a good point, although far, far short of the promises which are made for it or hopes which are invested in it.
    I think you're arguing against sort of a straw man here, Lark.

    As Catbert says, all "free market libertarian" ideology has to do is show itself to be generally better than the alternative.

    I don't identify with any political ideology, but, if I had to, I would call myself a moderate libertarian (that's what's on my facebook page).

    I don't believe the free market is infallible; I believe the lessons of behavioral economics present a very important critique of the neoclassical form of economics that was the dominant paradigm under which I was taught economics in college; I recognized this when I was studying economics in college, and fully believed that the blind faith many of our politicians and officials (Greenspan, in particular) were professing about the infallibility of the free market would prove to be a major contributing factor to the economic crisis I saw coming (being from Orange County originally, and seeing how much easy money was being made by half-wits I knew from high school who were working in the mortgage-brokering business, it was pretty obvious to me that lack of proper regulation of the mortgage industry was a major contributing factor to the housing bubble, and, based on my classes in finance, lack of proper regulation over credit-default swaps and other financial "innovations" seemed like a major impending problem to me [AIG, for this reason, was one of my three major short calls in the January of 2008 {WaMu and Countrywide were my other two}]); having been offered a position at a San Francisco-based mortgage broker upon graduating from college in '06, I told them, "Are you kidding me? I hope you realize your entire business is about to collapse, and you're going to take down the entire economy with you, you dumbfuck"; and yet, despite all of these opinions and facts, I don't feel I am inconsistent in any way by believing that, all other things being equal, too much government regulation of and intervention in the economy will tend to produce worse economic results.

    That does not mean I believe there is no role for regulation: I do.

    That does not mean I think taxes should always be cut, and that the government has no role in the economy: I don't.

    I just think that too much government regulation of and intervention in the economy will tend to produce less-than-optimal results.

    I also think that, beyond just the question of quantity, the question of quality is very important when it comes to regulation/intervention.

    p.s. Lark, I wrote this before reading your post above (#9); not sure whether or how they intersect, but I'll read it later (at the moment, I'm leaving to meet up with a friend); feel free to respond to this post in the meantime.

  4. #14
    The Eighth Colour Octarine's Avatar
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    Quote Originally Posted by Lark View Post
    The two responses to that I've heard tend to be either that the system is perfect, the people participating in it are flawed (which I think is a poor point when its made with regard to capitalism, socialism or any other economic paradigm because economies are supposed to be of service, not the opposite) or the analysis pointing up the flawed "naive psychological models" is itself flawed, ie people are not irrational, they just dont abide by "your rationale". The second point is a better one but both are disatisfying to me personally and just fall within the remit of pro or anti-state policy or pundit's arguments.
    Who said anything about perfection though? I guess you are talking about how some people interpret the ideology? I agree that ideological assumptions are part of the problem.

    Quote Originally Posted by Zarathustra View Post
    As Catbert says, all "free market libertarian" ideology has to do is show itself to be generally better than the alternative.
    Actually, I didn't say that at all. I implied that for specific cases, all that needs to be shown is that the market is a more effective computational system in terms of individuals' preferences (yes, Lark, I mean values!).

    But markets do not necessarily consider all the information involved and so the ends produced by the market might not necessarily be the set of aims desired by the populace.
    In terms of regulation, we have to move away from the naive regulatory models that we have currently. To start with, we do need to consider not just the expected effects on behaviour, but also unexpected effects, along with the structural implications of the policy. Part of the problem with much of the regulation is once it is brought in, people are reluctant to reform it further based on new knowledge of the unexpected effects, instead we often like to sweep those problems under the carpet, lest we acknowledge failure of the policy.

    I believe that the solutions to many of societal problems are simply not captured well by the 19th century ideologies (or the centrist/third way 'blend'). I think we need to move on if we are to recapture the human aspect in our political and economic theories.

  5. #15
    Senior Member Survive & Stay Free's Avatar
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    Re: Perfection, I tend to find that libertarians are utopian economists and will find flaws in the individuals quicker than they will neo-classical economics.

    Re:Strawman, I dont think I am arguing with a straw man but I'd be happy to read an elaboration or clarification of that point.

    Least worst option rationales for economies are usually poor basis for advocating or championing them as a design for life, its not usual to hear that "less than perfect, at least better than the alternative" argument deployed for libertarian free market paradigms by libertarians. Those sorts of pragmatic asserts, or candor, I actually have more time for than the staple of utopianism which usually suffices for arguments sake. Although that said it is the basis upon which I accept paternalistic welfare-capitalism or a mixed economy rather than free markets.

    To be honest arguments pro and contra state intervention and regulation are often flawed because they are presented in lousy either/or terms, its part of the reason I hate "political" dope smokers or drug libertarian arguments, I find they are simplistic and simplifying. There is such a thing as good and bad bureaucracy and they exist in both the public and the private sectors and I dont believe either is more or less inclined to be generative of either per se.

    Re: preferences, I think that's safer ground, it could be demonstrably better in an economy which is an exemplar of mixed economy by an objective standard of analysis of individual and social benefice, demand, supply and employment BUT an individual may find an alternative preferable, in which they or their neighbour may per chance fair better or worse.

    Case in point I believe would be the Amish. They prefer to live in communities in which the economy is demonstrably different to that of the rest of the country, it is probably a harder life for less, they prefer it.

    However, most libertarian rationales are not like that, it is not a matter of acknowledging faults and failings, often linked to fundamental precepts and underpinning theories, such as the models of rational calculation I've refered to as naive psychology, but instead really utopian promises, hopes and dreams.

  6. #16
    Order Now! pure_mercury's Avatar
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    Quote Originally Posted by Lark View Post
    Re: Perfection, I tend to find that libertarians are utopian economists and will find flaws in the individuals quicker than they will neo-classical economics.

    However, most libertarian rationales are not like that, it is not a matter of acknowledging faults and failings, often linked to fundamental precepts and underpinning theories, such as the models of rational calculation I've refered to as naive psychology, but instead really utopian promises, hopes and dreams.

    Where do you FIND these libertarians? Honestly, do you ever read any major libertarian texts, or do you just talk to idiots?
    Who wants to try a bottle of merc's "Extroversion Olive Oil?"

  7. #17
    Senior Member tinkerbell's Avatar
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    Have done bits professionally, but not an expert. You may also enjoy the book nudge which is really applied behavioural ecconomics (but I've not read it).

  8. #18
    No Cigar Litvyak's Avatar
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    Quote Originally Posted by Lark View Post
    How many people have read about behaviourial economics? I'm reading a book called predictable irrationality, which I have to say has been surprising for combining pretty dense but interesting scientific research with readability, on the topic. It is one of the better books on the topic too.
    I've read Freakonomics and I enjoyed it immensely, does it count as "behavioural economics"? Can you recommend us some books on this topic?
    I'm interested, but they don't really give a fuck about non-mainstream economics in my faculty, they push the neoclassical approach ad nauseam.

  9. #19
    pathwise dependent FDG's Avatar
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    Quote Originally Posted by pure_mercury View Post
    There are no contradictions between the findings of behavioral economists and libertarian economic philosophy. Free market economists do not need to rely on the assumption of perfectly rational actors. So. . . yeah.
    Yeah. What is contradicted by behavioral economics is traditional FINANCE theory, not ECONOMIC theory.

    Anyway, I'm quite familiar with behavioral economics - I wrote my master's thesis on its pratical applications to finance. What are you trying to discuss, Lark? I don't fully get it. I believe you should understand the subject a little bit more deeply before going around shouting opinions.

    Behavioral economics is just neoclassical economics applied modulated by a different kind of utility function and probability space - characterized by an anchoring point, risk proclivity for lossess and risk aversion for gains, plus over-estimation of small probabilities and under-estimation of large probabilities.
    ENTj 7-3-8 sx/sp

  10. #20
    Senior Member Shimmy's Avatar
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    Interesting thread. I don't think I know enough about the subject to intelligently join in, but I would like to point out that I think the term Libertarianism is used very loose here. Libertarianism holds the believe that individual freedom should be the the basis of social organisation. In context to this thread it means: no government regulations (apart from those that stop behaviour that directly limits the freedom of other individuals). Liberalism on the other hand holds the believe that liberty and equal rights are the most important values. This means that the government can regulate the market to make sure everybody gets equal chances.
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