Delicious LiveJournal Links for 1-17-2009

[andrewducker]

• Why so many minds think alike
  
  
  A new study in the journal Neuron shows when people hold an opinion differing from others in a group, their brains produce an error signal. A zone of the brain popularly called the "oops area" becomes extra active, while the "reward area" slows down, making us think we are too different.
  
  
  (tags: society psychology brains)
  
  
• The Birthday Calendar
  
  
  A modest proposal for calendar reform
  
  
  (tags: funny calendars)
  
  
• Zimbabwe unveils 100 trillion dollar banknote
  
  
  Remember that Zimbabwe redemoninated in mid 2008 and took 10 zeroes off the bills, and it hardly seems worth mentioning but they took 3 zeroes off in 2006. That makes this new bill 1,000,000,000,000,000,000,000,000,000 which may or may not be 1 nonillion dollars. It's a lot of zeroes, I may have missed a few one way or another.
  
  
  (tags: money currency zimbabwe inflation)
  
  
• An Economy of Faith and Trust
  
  
  Editorial on how rational theories of economics are based on a picture of human behaviour that's badly wrong.
  
  
  (tags: economics psychology)
  
  

Comments

[xquiq.livejournal.com]

I'll leave to one side the fact that the author appears to be referencing the current market, the classical model, neoclassical neoconservatism & Keynesianism interchangeably (they're not the same thing).

I would be extremely surprised to find any trained economist who believes or makes decisions based on individuals acting entirely rationally. Nor anyone who believes that real markets are 100% efficient or for that matter believes in the classical model.

Cognitive bias in economic decision making is well documented & has been for a number of years. For many types of decision economists can fairly accurately estimate what 'people' will do, however the impacts of people acting as the agents of larger entities vs individuals acting on their own behalf are going to vary widely.

Likewise the varying effects of regulation, deregulation, tax, exchange, market power differentials etc. etc. have been studied widely. What's tremendously difficult if not impossible is trying to apply this in a meaningful way to the complexity of modern markets.

Even if each party behaves rationally, it's not necessarily the case that the outcome of thoroughly rational self-interest is Pareto efficient or even remotely desirable.

I wouldn't classify any of the above as a 'new' body of thought.

What I think could be argued quite effectively is that governments have been slow to react to increasing market participation & increased complexity. Despite known flaws, something close to free market economics has been seen as the most efficient option & a certain complacency seems to have set in, whereby the impact of changes to those markets (e.g. new instruments & means of spreading risk in particular) have not been fully thought through.

[andrewducker]

I don't think any of it is new in the circles of economists or even those who pay attention to what's currently going on. But I don't think it's hit the mainstream - and a lot of people were sticking their fingers in their ears, because it's easier to believe simple things that feel right than it is to believe that the universe is actually a complex place with no easy answers.

[zz]

this conversation doesn't involve cheese. :(

[dreema.livejournal.com]

or ham!