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Matt_Simpson comments on Applying utility functions to humans considered harmful - Less Wrong
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Comments (114)
As is any model of human behavior that is tractable. All we're really going for is prediction anyway, so who cares?
Look if econ had little influence outside its field, I would agree and say who cares. However this is hardly case.
I would agree with something you suggested though. We would do well do just discuss the end results and remember that the models are trash.
The real damage comes from macroeconomics and I'd agree that most of the models used there are crap - because they fail at prediction.
I'm not sure I understand what you mean. Why does it matter whether econ influences other fields? Are you suggesting that people in other fields end up taking economic models too seriously? Or something else?
Good question. I would say that does happen. Dan Drezner comes mind on this front.
I meant to say that if it had little influence outside of the academy.
Well the models influencing the academy and what influences public policy are definitely not the same, if that's what you mean. I still don't see what you're getting at. If anything, I think basic economic models are under appreciated. Consider mattnewport's post for examples.
I haven't gotten back to matt's post, but I will. This sort of amazes me:
Economist have a huge amount of influence in public policy and US jurisprudence. I would be shocked to hear about another set of models simply for political and judicial consumption. Often they are leaning on economists and not the original work, but they would still be using the same model in this case.
Were it not for the structure of the Senate, we wouldn't have farm subsidies. Everybody but those from largely flat and empty states want them gone.
Apparently not enough. Consider:
minimum wage
income tax
capital gains tax
insider trading laws
fannie mae and freddy mac
tariffs and other trade restrictions
loads of different subsidies
the post office
etc.
In general, the median voter theorem is a much better predictor of policy than the "median economist theorem."
Wow. I replied to the minimum wage stuff a little in another post but I believe you have given me some low laying fruit.
You wouldn't only think this was a problem if you were a proponent of the strong efficient market hypothesis. There aren't many people out there that don't have misgivings about the weak version, much less the strong one.
Hmm. I'll let you explain further. Is it that these are less efficient than other taxes, or is it that they are the way government raise revenue?
The other ones could be interesting to debate, but I think you are a pretty serious libertarian who will not be happy unless society is organized in your way.
Where?
If the efficient market hypothesis false, I still think insider trading laws are a bad idea. The people with the best information about the health of a company are precisely the insiders. This is the sort of information that investors would love to have when deciding whether to commit resources to one company or another, and the sort of information which would be socially useful for investors to be acting on. None of this requires the efficient markets hypothesis, just that markets do process information, even if imperfectly.
Less efficient than other taxes. As a general rule, you never want to tax production - it discourages productive activities. Capital gains is different because it isn't production per se, but savvy trading - even on the stock market - serves a socially useful function. (Yes, that means I like speculators)
I am a libertarian, but probably not as serious as you think. Has it occurred to you that I'm mainly just reporting the collective knowledge of economists?
By the way, you still haven't explained why you want economists to have less influence, or what you want them to have less influence on.
You are reporting the collective knowledge of economists as reported to you by libertarians. Most economists are not libertarians and most support the status quo. Look for a survey of economists' opinions, eg, by Robert Whaples. They probably lean in your direction on all these issues, compared to the general public, but that does not mean they support them in absolute terms. eg, half want to eliminate the minimum wage, but half want it as is or higher.
Let me just endorse what Douglas Knight said.
You seem to have no clue what insider trading laws are. Company employees and executives can purchase stock. However it is illegal to act on information that is not public.
You can look for filings to see what executives are purchasing positions in their companies. Like you say, it is good sign if people who know the company well are buying in.
As Tyler Cowen would say, shout this from the rooftops.