Edward P. Könings

Noting an error in Inadequate Equilibria

I think your remarks are good, but I would like to add a few more critical points as an economist. First, the RGDP is a measure that captures more of the "supply side" of an economy, so it addresses issues related to the total factor productivity of an economy. In the case of Japan, as previously noted by Prescott and Hayashi in their article on the crisis of the Japanese economy in the 1990s, there is a major problem of productivity that affects the capacity for real growth. To the surprise of people who grew up with the myth of Japanese efficiency, Japan has been the economy with the lowest labor productivity... (read more)

The Illusion of Simplicity: Monetary Policy as a Problem of Complexity and Alignment

The Economics of Contracts

“There is nothing scarier than ignorance put into action” — Goethe

A common mistake in economic analysis is to consider that any type of “desequilibrium” in an economy can be solved through a simple government intervention. However, this reasoning ignores that government actions can also be flawed. Government failures generally arise as a result of epistemic or organizational limitations within the State.

With regard to monetary policy, one justification that can be given for its implementation is that the monetary authority could conduct macroeconomic policies to stabilize fluctuations in economic indicators; such as GDP, inflation and exchange rate. However, the authority faces a constraint on the ability to conduct this policy optimally.... (read 2218 more words →)

Introduction

How does a firm function in the real world? This question seems so ridiculously easy that it would deserve the description of “ululating obviousness”. However, it is an incredibly complex issue…at least in economics.

The usual view of economists, especially microeconomists, is that firms behave in an incredibly rational and orderly way. By this they do not mean that the entrepreneur is a superforecaster with unique abilities to analyze and forecast economic conjunctures, but rather that they behave... (read 2372 more words →)

Replying toThatcher's Axiom

Ohh yes, that was exactly one of my ideas when formulating this post. An AI alignment has to be designed in such a way as not to consider that society can be understood as a concrete / monolithic concept, but as an abstract one.

The consequences of an AI trying to improve society (as in the case of an agent-type AI) through a social indifference curve could be disastrous (perhaps a Skynet-level scenario...).

An alignment must be done through coordination between individuals. However, this seems to me to be an extremely difficult thing to do.

Replying toThatcher's Axiom

I - But would an analysis as sub-agents be better than an analysis as if they were the true agents? And why would they be subagents? Who would be the main causal agent?

II - Conclusions drawn from an analysis of utility theory through methodological individualism.

Replying toThatcher's Axiom

But if individuals are not the basic fragments (the units to which we can most reduce our analysis), then what?

In my view, we would start to enter into psychobiological investigations of how, for example, genes make choices. However, if we were to reduce it to that level, as David Friedman rightly observed, the conclusions would be the same...

Replying toThatcher's Axiom

The problem is that a holistic abstraction like "the society" is less effective in describing a picture closer to reality than the ideal type of methodological individualism ("the individual"). Reducing it to this fundamental fragment is much better at describing the processes that actually occur in so-called social phenomena.

And yes, Democracy is the system that best captures this notion that it is not possible to achieve a total improvement of the society.

Replying toThatcher's Axiom

It is certainly possible that there are ways to improve the situation of more than one person, given that non-zero-sum games exist. The problem, as noted by Elinor Ostrom in her analysis of the governance of the commons (Ostrom 1990, ch 5), is that increasing social complexity (e.g. bringing more agents with different preferences into the game) makes alignment between players less and less likely.

Rock, Paper and Scissors: A Game Theory View

In one of her most controversial quotes (there were many!) British Prime Minister Margaret Thatcher made the following statement: “There is no such thing as a society”.

This statement obviously caused enormous discomfort in British politics and even within the Conservative Party. How could the leader of a nation claim that society does not exist?! Thatcher was heavily criticized for this statement, although she never recanted having said it.

The thing is, Maggie wasn't all that wrong…at least in analytical terms.

To begin to understand what I mean, dear reader, we have to look at the context. Thatcher's quote was originally made in an interview of the Prime Minister for Woman's Own magazine and the... (read 958 more words →)