Evolution vs. Economics

[Crissa]

You're right, Catharz.

But for every time I think about some bit of bright science there comes two times I have to listen to someone stomp on that flower like Dr Pinker.

-Crissa

[cthulhu]

identical twins raised separately exhibit uncanny similarities;

Shit like this is deceitful. Yes they will be similar (der) and yes they will have the same IQ, but WE KNOW that things like income will depend on the foster parents.

Bleh.

[Absentminded_Wizard]

Part II is up.

This one deals with the Allais paradox and why (according to the author) economic paradigms are particularly resistant to incremental change.

[CatharzGodfoot]

Part II is up.

This one deals with the Allais paradox and why (according to the author) economic paradigms are particularly resistant to incremental change.

I like how he sidesteps the fact that while economists were still doing bullshit, psychology grew up, learned about Bayesian probability, and psychologists started solving actual economic problems.

[Edit]Here is an interesting argument for socialism. Who would have thought that the free market results in people paying themselves as much as they can rather than responsibly based on the value of their work?

[Gelare]

Part II is up.

This one deals with the Allais paradox and why (according to the author) economic paradigms are particularly resistant to incremental change.

Okay, I was skeptical after the intro, but now that he's put up some more stuff, I'm sure he's just talking out of his ass. He's making it sound like there's one Big Book of Economics that contains all the economics that's fit to print, and risk-tolerance has been left out of that book. That's painfully retarded on many levels, but the top two are that 1) as models get more complicated, they get harder to use; risk tolerance should be considered only on those occasions where it might play a significant role, and 2) risk tolerance is totally a part of generally accepted economic canon. Like, holy crap, that's what insurance is. This guy is evidently equipped only with terrible and outdated arguments. I'll resume interest when he catches up to the 21st century.

[tzor]

Part II is up.

This one deals with the Allais paradox and why (according to the author) economic paradigms are particularly resistant to incremental change.

Any gamer would immediately spot the error in his logic from the first paragraph; his example is flat out wrong. His example falls under the “Law of the one shot.” Simply put, when you only get to roll the dice once the law of averages doesn’t apply. If one has a single choice between a guaranteed level of happiness ($1M) or the possibility of getting either nothing or much more happiness ($2.1M) it doesn’t matter what that much more is because there is the chance of nothing. The “average” never enters the equation because you only get one choice. (Ironically you can invert the Law of the one shot by applying the revelation of a thousand cuts; this actually inverses the entire process on its head and people will actually go for the chance; this is why programs with scantly clad ladies and suitcases are extremely popular.)

Never the less, WTF does this have to do with “evolution?” This is psychology, not evolution. Moreover, as I stated above, this is clearly the “one shot” nature of the example, a situation that rarely occurs in the real economic world where you go to the store every day, go to work every day etc.

[CatharzGodfoot]

Part II is up.

This one deals with the Allais paradox and why (according to the author) economic paradigms are particularly resistant to incremental change.

Any gamer would immediately spot the error in his logic from the first paragraph; his example is flat out wrong. His example falls under the “Law of the one shot.” Simply put, when you only get to roll the dice once the law of averages doesn’t apply. If one has a single choice between a guaranteed level of happiness ($1M) or the possibility of getting either nothing or much more happiness ($2.1M) it doesn’t matter what that much more is because there is the chance of nothing. The “average” never enters the equation because you only get one choice. (Ironically you can invert the Law of the one shot by applying the revelation of a thousand cuts; this actually inverses the entire process on its head and people will actually go for the chance; this is why programs with scantly clad ladies and suitcases are extremely popular.).

So, Tzor, if I offered you the choice between $1m for sure and two 40% shots at $1.3m, which would you take?

[RobbyPants]

I know I'm not Tzor, but I'd just take the million. Taking the two 40% shots still gives me a 36% chance to get nothing. A million bucks would be life changing for me. Even if I could average more the other way, having 1.3 or even 2.6 million wouldn't be that much of a bigger deal.

I'd take the sure thing.

[tzor]

So, Tzor, if I offered you the choice between $1m for sure and two 40% shots at $1.3m, which would you take?

Well, I do know a little about odds, so let's see
Chance fail is .60^2 = .36
Chance succeed = succeed + (fail & succeed) = .40 + (.60 * .40) = .64

Odds = chance succeed / chance fail = 1.777...

Current odds are 1.3

Can't bet on that horse, sorry.

[CatharzGodfoot]

So, Tzor, if I offered you the choice between $1m for sure and two 40% shots at $1.3m, which would you take?

Well, I do know a little about odds, so let's see
Chance fail is .60^2 = .36
Chance succeed = succeed + (fail & succeed) = .40 + (.60 * .40) = .64

Odds = chance succeed / chance fail = 1.777...

Current odds are 1.3

Can't bet on that horse, sorry.

K. What if it was $1 for sure or two 40% chances of getting $1.30?

[Orca]

I think what the blog writer's saying is that the math in economic theory gets complicated if you assume that there's a noticeable chance people will take 100% certainty of $1M rather than a 50% probability of $2.1M.

Therefore there's this gaping hole in standard economic theory which doesn't reflect what people actually do.

EDIT: From your argument Tzor, you're actually agreeing with the writer.

[Gelare]

I think what the blog writer's saying is that the math in economic theory gets complicated if you assume that there's a noticeable chance people will take 100% certainty of $1M rather than a 50% probability of $2.1M.

Therefore there's this gaping hole in standard economic theory which doesn't reflect what people actually do.

But that's not true.

Correction: There are many gaping holes in standard economic theory that cause it to not be an absolutely perfect description of peoples' behavior. This is why people are doing research and coming up with new theories. But risk aversion isn't one of those holes, and hasn't been for decades. So the author is full of shit.

[Jacob_Orlove]

How is this even an economic paradox? On average, marginal utility goes down for goods as you get more of them (only a few goods have increasing marginal utility). Dollars are basically the same thing as an "average good" because you can buy whatever you want with them.

Thus, the more dollars you have, the less you care about getting one additional dollar. That's why people will take the sure million--the extra few dollars you could get from the risky option don't balance out the hugely lower utility of getting no money.

The whole "paradox" is just an optical illusion based on the idea that dollars are an exact measure of utility. They aren't.

[CatharzGodfoot]

I think what the blog writer's saying is that the math in economic theory gets complicated if you assume that there's a noticeable chance people will take 100% certainty of $1M rather than a 50% probability of $2.1M.

Therefore there's this gaping hole in standard economic theory which doesn't reflect what people actually do.

But that's not true.

Correction: There are many gaping holes in standard economic theory that cause it to not be an absolutely perfect description of peoples' behavior. This is why people are doing research and coming up with new theories. But risk aversion isn't one of those holes, and hasn't been for decades. So the author is full of shit.

The author is talking about historical economic theory. Risk aversion was a hole in economic theory.

How is this even an economic paradox? On average, marginal utility goes down for goods as you get more of them (only a few goods have increasing marginal utility). Dollars are basically the same thing as an "average good" because you can buy whatever you want with them.

Thus, the more dollars you have, the less you care about getting one additional dollar. That's why people will take the sure million--the extra few dollars you could get from the risky option don't balance out the hugely lower utility of getting no money.

The whole "paradox" is just an optical illusion based on the idea that dollars are an exact measure of utility. They aren't.

The paradox is the contradiction that occurs when the model of maximum expected monies is combined with real wold data of people maximizing utility (whatever that means). It's just not a paradox in the modern models which were inferred from real-world data.

[Gelare]

The author is talking about historical economic theory. Risk aversion was a hole in economic theory.

True fact. And now it isn't. Which means the author is giving examples which directly contradict his stated hypothesis of "incremental progress can't happen in Economics". So way to go.

[Absentminded_Wizard]

The author is talking about historical economic theory. Risk aversion was a hole in economic theory.

True fact. And now it isn't. Which means the author is giving examples which directly contradict his stated hypothesis of "incremental progress can't happen in Economics". So way to go.

His hypothesis isn't that incremental change doesn't happen in economics; it's that economics is more resistant than the physical sciences to incremental change. The case in point is that it took 40 years for the field to begin to acknowledge an obvious hole its reasoning after it had been pointed out.

[tzor]

I heard an interesting joke on Morning Edition the other day or rather a saying, “Micro Economists get the details wrong and Macro Economists get things in general wrong.” Physiology is a major factor in the decisions people take on an everyday basis and part of that physiology includes filtering of raw data inputs (an aversion to thinking about bad news) and thresholds on happiness that affect subsequent increases in happiness.

But there are other factors, and that same decision right smack in the middle of a session of “Deal or No Deal” (the guy on the phone offers you 1M, the 2M suitcase and the 0 suitcase are both available and you have one or the other) will produce the exact opposite from what the person described in the one shot scenario.

His hypothesis isn't that incremental change doesn't happen in economics; it's that economics is more resistant than the physical sciences to incremental change. The case in point is that it took 40 years for the field to begin to acknowledge an obvious hole its reasoning after it had been pointed out.

Science is famous for being resistant to incremental change. In general incremental change only occurs quickly when it is generally believed that the current system is FUBAR. Classical electromagnetic theory, for example, actually proved that atoms can’t exist. Classical physics (laws of momentum) was also incompatible with electromagnetic theory; the former allowed acceptance of quantum mechanics and the later allowed acceptance of relativity; even though Einstein was highly resistant to quantum mechanics.

Plate tectonics? Originally was considered a crackpot idea by the scientific community at large. Darwin’s theory of evolution was originally laughed at to by the scientific community. Conversely there is a lot of “science” that turned out to not be the case whatsoever.

The fundamental difference between most science and economics is that experiments can be repeated. In as much as economics tries to be a predictor of future history it becomes harder and harder to create reproducible experiments to verify theories. In fact, people still form opposite lines of the spectrum on how FDR handled the great depression; never mind you can’t duplicate the great depression in the lab.

[CatharzGodfoot]

The author is talking about historical economic theory. Risk aversion was a hole in economic theory.

True fact. And now it isn't. Which means the author is giving examples which directly contradict his stated hypothesis of "incremental progress can't happen in Economics". So way to go.

Yeah, his claim is that incremental change didn't happen. That the shift from philosophy-based economics to empirically-based economics involved the scrapping of the old paradigm. As always, it's a matter of degrees--but the degree of this change is as significant as the shift to behaviorism in psychology. It's a much bigger change than, say, general relativity.

[Absentminded_Wizard]

I heard an interesting joke on Morning Edition the other day or rather a saying, “Micro Economists get the details wrong and Macro Economists get things in general wrong.” Physiology is a major factor in the decisions people take on an everyday basis and part of that physiology includes filtering of raw data inputs (an aversion to thinking about bad news) and thresholds on happiness that affect subsequent increases in happiness.

But there are other factors, and that same decision right smack in the middle of a session of “Deal or No Deal” (the guy on the phone offers you 1M, the 2M suitcase and the 0 suitcase are both available and you have one or the other) will produce the exact opposite from what the person described in the one shot scenario.

Deal or No Deal messes with the formula, though, by not telling you what your guaranteed payoff is. Thus, everybody assumes that their case has the largest possible cash amount.

His hypothesis isn't that incremental change doesn't happen in economics; it's that economics is more resistant than the physical sciences to incremental change. The case in point is that it took 40 years for the field to begin to acknowledge an obvious hole its reasoning after it had been pointed out.

Science is famous for being resistant to incremental change. In general incremental change only occurs quickly when it is generally believed that the current system is FUBAR. Classical electromagnetic theory, for example, actually proved that atoms can’t exist. Classical physics (laws of momentum) was also incompatible with electromagnetic theory; the former allowed acceptance of quantum mechanics and the later allowed acceptance of relativity; even though Einstein was highly resistant to quantum mechanics.

Plate tectonics? Originally was considered a crackpot idea by the scientific community at large. Darwin’s theory of evolution was originally laughed at to by the scientific community. Conversely there is a lot of “science” that turned out to not be the case whatsoever.

If the new theory is completely incompatible with the old theory, then it's not really incremental change. If electromagnetic theory was incompatible with classical physics, then it was a complete paradigm shift, which you would expect to be resisted more strenuously than a mere tweak.

Plate tectonics? We're talking about going from the idea that continents stand still to the idea that they move around wildly over time. That's hardly an incremental change of the kind the article's talking about.

Now I guess you could argue that Darwinism wasn't that huge a paradigm shift, since various evolutionary theories had been proposed before. Darwin's trouble was more with Victorian culture (which affected even the attitudes of scientists). The idea that a random process produced creatures adapted to survive in their environments went against all the old ideas of a purpose to the universe in a way that LaMarcian evolution didn't. After all, if giraffe's necks get longer from a need to reach higher tree branches, then there's still a purpose underlying the evolutionary change even if that purpose doesn't come from the design of a higher power.

[Username17]

The Chicago School Hurts My Mind.

-Username17

[CatharzGodfoot]

The Chicago School Hurts My Mind.

-Username17

Holy fuck, that guy sounds like he's talking about Intelligent Design. When it comes to the most important questions, he throws his arms up and says 'we couldn't possibly know that'.

[Crissa]

Well, plate tectonics actually did evolve from knowing that volcanoes moved around, as well as mountains and fault lines.

So basically, the idea was first that the insides of the earth moved, or maybe just smaller things like hotspots and fractures. Eventually it was just blown wide open from 'gosh, you could fit the continents together like puzzle pieces' to 'omg, there's like seams all over the world! It really does seem the whole continents move!'

It wasn't all at once, all the parts were theorized ahead of time, just the proofs hadn't been dreamed up until they sorta landed onto people's laps.

Science is funny that way, sometimes, where something proves something you completely weren't thinking about at the time.

-Crissa

(I've been wanting to say that all month, but never got back to the thread until it popped up.)

[Absentminded_Wizard]

The Chicago School Hurts My Mind.

-Username17

Holy fuck, that guy sounds like he's talking about Intelligent Design. When it comes to the most important questions, he throws his arms up and says 'we couldn't possibly know that'.

Wow, there's more circular logic, ad hominems and double-standards in there than Paizo could pull off in a thread about whether Pathfinder is good, bad, or ugly.