Brian_Macker

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Cynicism in Ev-Psych (and Econ?)

Nobody,

"Seemingly irrational action is rational, that is, has an aim. To appraise it as irrational, the appraiser merely imposes some other external source of value."-Michael Rozeff

If and individual spends their life hunting for Bigfoot they are acting rationally as far as economics goes. The are taking action with a goal in mind.

Economics can't and shouldn't make value judgments about goal directed actions.

Economics (even particular schools of economic) have specialized terms that do NOT mean the same thing as common usage.

There's nothing charming about quarks and yet the term "charm" is used in physics.

" We want the simplest explanation that accounts for the data." We want the best theory in a Popperian sense. One measure is simplicity but another measure of that is the theory that explains the most. Austrian business cycle theory explains many aspects of the business cycle that other theories do not. It can explain stagflation for instance whereas Keynesian theory cannot. It explains why commodity prices rise more than average price increases. Etc.

Cynicism in Ev-Psych (and Econ?)

"Psychology (evolutionary or otherwise) seems to be merging with economics already"

Yes, and that's unfortunate because emotion is not all that important to understanding the business cycle. There is a perfectly good explanation that shows that an economy made of quite rational agents [in the economic sense] will generate the business cycle. Not only does it explain the cycle itself but particular aspects of the cycle.

Emotive economic theories are not new. To believe that the business cycle is due to "animal spirits" like Keynes did is wrong and will lead to bad solutions. It's like believing that loosing altitude on your plane is due to gremlins on the underbelly weighing it down and therefore the best way to deal with it is to rub them off by flying even lower over some trees.

We've set up an economic system that is based on a banking pyramid scheme and of course people become excited as they falsely believe they are raking in real earning based on asset appreciation. Then of course they get upset and panic with the fraud becomes apparent later. Those are effects, not causes.

I wouldn't mind moving on to the emotional aspects of the business cycle if they were recognized for what they are, effects not causes. Also if there was an understanding that rational in the economic sense and emotive in the psychological sense are orthogonal concepts. One can be a rational economic actor and be emotive also. I really don't see how there is much difference in behavior between an rational non-emotive actor and a rational emotive actor in the economy and in response to the business cycle.

After all it is rational to buy stocks as they rise and sell them as they fall. It is rational to respond to the government setting interest rates below market by borrowing.

One thing about rational actors is that the are not presumed omniscient. They can be tricked by sophisticated pyramid schemes like fractional reserve banking. In fact it's such a sophisticated scheme that most economists, let alone most people, don't recognize how it is fraudulent, and why it leads to boom then bust.

BTW, in the economic sense the non-rational actors are what we would call the insane. The term rational actor is suppose to cover every sane person.

Normal Ending: Last Tears (6/8)

"Why did the SuperHappies adopt the Babyeater's ethics? I thought that they exterminated them."

They only exterminated the one ship so that it wouldn't blow up the star.

Three Worlds Decide (5/8)

For gosh sakes Faré it's only a story.

Three Worlds Decide (5/8)

I misread it just as Anonymous Coward did. I thought they killed the Babyeaters and head back on their (the Babyeaters) star line. Thus I thought AC's first solution was perfect. I also liked AC's second solution.

Worse Than Random

"Sorry if I was overly brusque in my response."
No, I don't believe you are sorry. I think you have a particular view on economics that colors your questions. You're looking for some angle to justify those beliefs. It's quite clear that the Austrians are correct about what is occuring right now.

"Because for the moment a simple "classical economics + power law of random fluctuations (possibly giving way somewhat to a gaussian distribution for rare events)" seems a much more economical theory fitting the data ..."

Really? The "classical economics" was abandoned long ago by mainstream economists. Therefore I'm not sure what you mean by it. Since there is no school of economics that has any way of predicting prices that even somewhat fit I'm thinking that your just rationalizing here. Since prices, from the standpoint of ignorance, already looks gaussian it seems that almost any old theory could make this claim you are making. Doesn't really provide a means to test between one theory and the next.

Why should I be satisified with a theory that claims to predict prices, but can't, and only "fits" if one assumes that it's wrong by a gaussian corrective value? Meanwhile it has no explanatory value, and very often is not only counterintuitive but self contradictory?

That's a way to falsify a theory, self-contradiction, that many schools of economics completely ignore. The "liquidity trap" being an example of this kind of crazy thinking. Failing to have a proper theory some schools of economics are forced to accept what is obviously a ridiculous and self contradictory explanation of events. They drop fallacies like a chicken it a factory farm. Krugman for example actually believes in the brokent window fallacy in addition to the "liquidity trap" fallacy.

It's quite clear what is going to happen next with the economy. I personally predicted that the Fed was going to take the actions it is now taking back in 2003, choose inflation. Their backs are against the wall for prior stupid actions and now they have choosen to inflate. They increased the base money supply over the past two months at a rate of 341%. I laugh at the people who think they can just "mop this up later". Mop it up with what, their credibility? They are figuratively in the position of someone trying to pull themselves up by grabbing their bootstraps.


Worse Than Random

"'Emergence';, in this instance, is an empty buzzword.

Buzzword in this instance is a buzzword. This sentence is merely an assertion. I read that article before I wrote my argument. The phrase, "emergent behavior" and the word "emergence" have a specific meaning and it isn't about giving a "mysterious answer to a mysterious queston".

For example, Mises can and does give a complete and non-mysterious explaination of how the business cycle is a result of fractional reserve banking. Likewise, he can explain how market prices arise, and why markets clear at the market price. All in a very reductionist fashion.

"Imagination" also seems likely to be an empty buzzword, ..."

No, it's has the same exact meaning as in "Creationist lack the imagination to understand how evolution works." or "Behe, lacking the imagination to understand how eyes arose proposes the concept of irreducible complexity".

"Markets do not allocate resources anywhere near optimally, and sometimes they do even worse than committees of bureaucrats; the bureaucrats, for instance, may increase utility by allocating more resources to poor people on grounds of higher marginal utility per dollar per person."

I didn't use the word "optimally" anywhere in my comment. I said it "solved the problem of resource allocation."

The rest of you statement is just a bald assertion. In fact, "allocating resources optimally", is an ill defined concept. Allocated optimally in reference to what value system? The very concept of thinking you can make a utility function in the way you construct it is absurd, and ignores factors of that wealth redistribution that would harm the very poor it was suppose to help. Actual real world experimentation with redistributive systems like communism have shown it to be a bust.

Your statement is true in the same sense that it is possible by brownian motion for an elephant to fly. Markets are analogous to distributed supercomputers where each individual participates as a processor and prices are the signaling mechanisms between the processors. If you mess with those signals you get predictable results, depending on what you do and what kind of price you mess with.

"If you think you know more than Bernanke, then why haven't you become rich by making better-than-expected bets?"

Wow, you assume a lot. Firstly, my mother was a sharecropper, and my father a poorly paid college professor. I paid my own way through college. So it's not like I had a big nest egg to invest.

I did however predict the surge in sliver prices. I did converted my IRA to bullion. I did quadruple my investment in four years.

Besides, it's not the position of my theory that you get rich by understanding economics. That's your ridiculous claim. Did you apply that theory to Greenspan or Bernanke? Why in the world aren't all these economists retired rich? I mean that's your theory, right?

Worse Than Random

Stuart Armstrong ,

"By 'comprehend the emergent behavior' do you mean that you have a vague intuitive feel for this, or that you have the equations relating interest rates to other factors, along with enough mathematical theory to make specific quantitative predictions?"

If I believe that a individual or committee cannot determine a market price other than by actually observing one then why on earth do you think I am claiming to be able to "make specific quantitative predictions?"

Those economists that make the mistake of thinking they can make a killing in the market are notoriously bad at it. Greenspan being an example.

Austrian theory holds that you cannot make the kind of quantitative predictions you expect to. So when you can predictibly and consistently make quantitative predictions on your economic theory then you can prove Austrian theory wrong.

"If you (or people like you who "comprehend the emergent behavior") did not make a lot of money out of the current crisis, then your statement is wrong."

Not at all. One can predict that the actions of say, Mugabe in Zimbabwe, would be an economic disaster without being able to capitalize on it.

"Explanations after the fact are simply stories."

But the explainations were given before the fact. Austrian theory exists as a model and it predicts certain outcomes given certain actions.

In the theory, below market interest rates result in low savings, overborrowing, trade deficits, asset inflation, and market bubbles. Everything that has been occuring makes sense in light of the theory.

BTW, that theory predicted the Great Depression before the fact, and this crash before the fact. It also predicted the existence of stagflation before the fact.

Likewise it predicts that the current actions of the Fed if continued are going to lead to inflation, all other things being equal.

The current crisis was caused by fractional reserve banking and monetary inflation and the current solutions being proposed and acted on by the likes of Krugman are to inject more money. These are precisely the wrong things to do.

Interest rates are prices like any other. It's well understood that when you put a price ceiling on a good that you get shortages as consumers try to consume more at the lower price and producers produce less. That is exactly what we are experiencing now, a shortage of capital due to a price ceiling on interest rates. This is a simple case of trying to violate economic law and being stung by it.

Austrian theory has more to say on the matter in that this kind of monetary inflation causes misallocation of resources but I'll refrain from writing a long article. It isn't at all about "vague intuitive" feelings either. It consists of clear, understandable mechanisms by which each result can be deduced from the model.

Worse Than Random
Or you may have heard people talking about "emergence" as if it could explain complex, functional orders. People will say that the function of an ant colony emerges - as if, starting from ants that had been selected only to function as solitary individuals, the ants got together in a group for the first time and the ant colony popped right out. But ant colonies have been selected on as colonies by evolution. Optimization didn't just magically happen when the ants came together.

I don't think the point of stressing emergence is to explain via the conjuring of magic. The point is to counter the idea that something as simple and stupid as ants couldn't possibly do something complex other than by magic. It's people’s lack of appreciation for emergent behavior that is the problem. They see the simple but can't understand how to get the complex out of it. They then believe that there must be some intelligent force behind the emergent behavior.

We are currently living through a crisis that is in large part due to this lack of appreciation for emergent behavior. Not only people in general but trained economists, even Nobel laureates like Paul Krugman, lack the imagination to understand the emergent behavior of free monetary systems. Lacking the belief that such systems could actually operate without some outside intelligence in control they set up central planning agencies like the Fed. Then like any central planning agency trying to control a market it will fail, precisely because the emergent behavior of the market is more powerful, more intelligent, in solving the problem of resource allocation than any committee.

Even with all the evidence staring them in the face they will still not grasp their mistake. It's obvious to those who comprehend the emergent behavior that interest rates have been set way below market rates, for too long, and that is the cause of the current crisis. The committee made the mistake of thinking it could use general price signals directly to decide on the price signal for interest rates. Price stability, keeping inflation within certain bounds was believed to be the control metric to follow. Unfortunately "the market" was trying to deflate prices due to productivity increases caused by the Reagan/Thatcher revolution. Holding prices steady (to slight inflation) was contrary to market forces and therefore the wrong move.

Free markets are emergent behavior. It is quite amazing that complex coordination can operate on such simple principles without some central agency. The fact that it works better than any central agency could is even more amazing, to most people. Once you understand it then it's not so amazing but it is very difficult to understand. Ben Bernanke doesn't understand and Alan Greenspan didn't understand before him. Emergent behavior is non-magic masquerading as magic.

So emergent behavior is a useful concept when you know what it's about. It's a bias checker.

Complexity and Intelligence

No, sexual selection does not determine which mutations occur. It's merely a reinforcing feedback loop that is actually considered an example of how evolution can run off the rails, so to speak.

Sure females might by accident happen to pick a feature in males that might prove adaptive. Unfortunately for your argument it is not based on prediction, but is happenstance. Even were the "correct" feature choosen initially there is then the tendency of sexual selection to over select for the feature merely because other females find the feature attractive.

So it might be that slightly longer horns might be more adaptive in fighting off predators. However once females start mating with males based on horn lenght for the sake of horn length then they just keep getting longer to the point of detriment to the survival of the males. This is quite obviously a very bad example of prediction. Again, it's all in retrospect, and if no mutations happen to occur in the direction of longer horns then no matter how much females want longer horns it isn't happening.

Furthermore, sexual selection operates in reverse on the females and that's why it also gets out of hand. Mutations that happen to drive females brains to desire longer horns even more will tend to make them more likely bear sons that are attractive to other females. No prediction here, just a run away process that ends up being limited by the ability of males to suffer under their oversize horns.

Notice that there is no mechanims here for the female preferences to invent new mutations for either longer horns or increased preference for longer horns. If a female happens to have an extra heavy fetish for long horns that was environmentally driven that cannot and will not cause any mutation that she could pass on to her offspring to make them have the same level of passion for long horns.

It's the genes that build the female brain to prefer long horns in the first place, and not some inductive process in the brain that generated the preference. By definition there must be preexisting gene or the trait wouldn't be heritable and by definition sexual selection could NOT occur.

The Balwin effect is merely the believe that socially passed behaviors can lead to fixation of genetic traits. Perfectly possible and again it has nothing to do with prediction. Genetic fixation could only occur given the random creation of the correct mutations, plus a static environment with regard to the trait in question. This really is no different than geneticially mediated behavioral changes driving changes in other traits and behavior.

Once plants took to growing on land by minor adaptations to say drying then selection pressures on other traits change. Traits like tall stems to overshadow competitors on land are selected for. That's not predictive. The new selective pressures are merely the result of the change in habitat. The adaptation to drying didn't "predict" that longer stems would be needed, nor did it generate the mutations for longer stems.

Likewise a behavioral change of say a fish hunting on land like the mud skipper will naturally lead to new selective pressures on other traits like, ability to withstand sun, or drying, or whatever. That doesn't mean that the fish behaviorially deciding to hunt further ashore in any way predicted the need for the other traits, nor does it mean that it's brain created new mutations that were stuffed back into the genome. It's perfectly possible that the random process of mutations just never produces the proper mutations to allow that mud skipper to fully adapt to the land.

The mutations are the random guesses as to what might work and are entirely unintentional. In fact if you've read Dawkins there is selective pressure against mutation. Those random mistakes however allow natural selection to explore haphazardly through different body plans and sometimes things go in the right direction, and sometimes not.

Even if females liked males with bigger brains as evidenced by say singing. That doesn't neccesarily mean that males spending lots of time singing, and females listening to that singing is predictive of anything. Big brains are just one more trait and it might be that the selective pressures in the environment are actually changing in a way that is selecting for smaller brains just as sexual selection is operating in the opposite direction. Rich food sources needed to supprot big brains might be decreasing over time as the habitat becomes more arid. In which case extinction is a likely outcome.

Which is another lesson I think you need to learn from biologists. You seem to believe in some kind of inherent "progress" to all this. That's not the case. It's perfectly possible for organisms to be subjected to selective pressures that move them to what most people would see as regression. That's why there are so many "backwards" parasites from what are more "advanced" lineages. Often in animals that have brains that predict.

Many a species with a predictive brain has walked the path down specialization to extinction.

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