Swimmy comments on Broken window fallacy and economic illiteracy. - Less Wrong

7 Post author: Desrtopa 01 December 2010 04:48AM

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Comment author: Swimmy 03 December 2010 01:53:33AM 2 points [-]

I suppose the worst thing for me to hear at this point is that there is some reason with which I am not yet familiar which prevents this from having grand scale detrimental effects on the economy, since it would imply that businesses cannot be made more sane by the increased dissemination of basic economic information.

The question is whether businesses can be made more profitable with employee economics training, which is costly. I'd wager that they can't; otherwise, there's a $20 bill lying on the ground and nobody's picking it up. Not saying those aren't around, but they're rare.

Economists usually presume that people max utility subject to constraints whether or not they can explain it in terms of opportunity cost or broken windows. The Caplan thesis is that people only do so when there's some positive cost to acting irrationally. I expect most businesses can't be made more sane with econ training because they're profit-seekers, but policy can be made more sane because voters are not.