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Old 09-11-2019, 03:10 PM   #6842 (permalink)
aerohead
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irrationality

Quote:
Originally Posted by redpoint5 View Post
Most of that seems reasonable to me. As I've maintained, I'm not Libertarian because "what do you care if I pee in my side of the pool" mentality doesn't address the tragedy of the commons. The pee might be diffuse all the way at the other end of the pool, and not of much consequence, but when everyone in the pool has that mentality it becomes a problem.

I completely agree that risk takers are due both the rewards of taking the risk, and the catastrophe of failure. BTW- my position on this is consistent weather we're talking about businesses or individuals. That said, I'll voluntarily help a neighbor in need if it indeed is help to them.

The fair criticism of economics is that much of it assumes perfectly rational decisions, but we know that people aren't rational. Freakonomics addresses this. Even though economics assumes rational exchanges despite that not representing reality, the principles still have predictive power, especially the fundamentals such as supply and demand.

Anyhow, I bring up the irrationality of people because that is reason enough to set boundaries and regulations on business. These regulations need to be as minimal as possible and show a net benefit to society. Requiring certification to braid hair doesn't serve the public interest. I'm skeptical of all certifications because they haven't shown to be effective at protecting people.

The higher up the government chain you go, the less effective it becomes. Government needs to be as local as possible, because it needs to be nimble to address the local problems. Only things like protection of the commons (environment) and protection from foreign enemies and securing the border are appropriate for top levels of government. Even then, the boundaries should be made as wide as possible. Instead of dictating the size, shape and fuel of a vehicle, set the limit for the thing we're trying to reduce and let the market determine how they will solve that problem.



The whole piece seemed coherent to me, if it may be off on the specifics of the problem. The argument wasn't that we do nothing, rather that we be realistic about what we're talking about doing. To do something requires evaluation of the cost and benefit, otherwise the probability of successfully solving a problem is near zero, or introduces new problems that weren't properly considered in the first place.
In Quiggen's discussion on the 'Efficient Market Hypothesis' he gets into Louis Bachelier's 'random walk hypothesis which is embedded within the EMH,which assumes that market participants are rational,of which there is no evidence.
There's quite a bit about investor psychology mentioned,like the 'martingale' betting strategy,where trader will chase losses until bankrupt when they ought to have immediately cut their loss an run.
Psychologist,Daniel Kahneman received the Nobel Prize in economics for his 'behavioral economics' and 'behavioral finance' research..............heuristics.
Richard Thaler has also studied investor psychology....hyperbolic discounting.
Infinite contingency paradox....asymmetric information.... models of bounded rationality.
As far as certifications go,they may be like building codes.When I helped a friend build his house back in '86,we were giving the inspector a light-hearted bad time and he explained that everything in the codes were a consequence of loss of life,one way or another.
As to the long article about resolving the energy/climate issue,a better-read journalist would have known the degree of intensity a society can go to,if they resolve to expedite solutions.In times of crisis,the 'economics' of the situation aren't even on the radar screen.When your kid is rattlesnake bit,you're not going to delay treatment over the emergency room's $60,000 fee.
As far as 'Big Government' goes,consider that your digital computer was developed by the publicly-funded military.(Colosus /ENIAC)
The internet was a DARPA, military/global university sector project.
The first web-browser,MOSAIC, was created at the publicly-funded,National Center for Supercomputing Applications,and became what you know as 'Netscape'. The reason you have highways,safe drinking water,waste treatment,airports,harbors,levees,dams,electrical power,safe food,safe drugs,clean air and water,etc. is because of Big Government.And like Adam Smith said,the only reason a rich man (and his security team) can sleep soundly at night is because he's got a powerful government watching his back.
The rascists,biggots,homophobes,sexists and anti-semites in my family were chagrined to learn that it was a homosexual at Bletchley House,who cracked Hitler's ENIGMA Code,helping to accelerate the end of WW-II,and their cell-phone operates on a system designed by a female Jew.
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