Comments on: Are The Big Four Econ Errors Biases? http://www.overcomingbias.com/2006/11/the_big_four_ec.html Overcoming Bias is economist Robin Hanson’s blog, on honesty, signaling, disagreement, forecasting, and the far future. Fri, 19 Mar 2010 01:28:19 -0400 http://wordpress.org/?v=2.8.5 hourly 1 By: Jain http://www.overcomingbias.com/2006/11/the_big_four_ec.html#comment-424281 Jain Wed, 19 Dec 2007 03:17:40 +0000 http://prod.ob.trike.com.au/2006/11/are-the-big-four-econ-errors-biases.html#comment-424281 Bryan Caplan has found that it is easy to explain people by claiming they are irrational. Easy, but unproductive. It is difficult to find economic answers to questions if one assumes that the agents are acting against their own best interests. I do not claim that economics has all of the answers, but shouldn't we continue to try to explain these phenomona under the assumption of rationality? How about this. In each case, the people making these arguments are acting in their own best interest. Sure, none of these policies are in the long-run interest of the country, but who, outside of university faculty, have the job security that allows them to put the long run (i.e. infinite horizon, overlapping generations, etc.) ahead of the short run. In the short run, politically, most people must fight to make sure the human capital they spent decades accumulating maintains its value. This leads to anti-foreign, make-work, and anti-market bias. The pessimistic bias is defensive. Politically, it is always good to give others the impression you are willing to fight to keep what you have. The best way to convince people of this is to tell them how bad things are. It seems that people are rational (and not biased), but Caplan is urging them to put their own best interests aside and push for programs that will help economic growth and future generations. If they acted accordingly, what economic model would explain that behavior? I think, it is then that we would have to put our economics aside and look for explanations based in irrationality. Bryan Caplan has found that it is easy to explain people by claiming they are irrational. Easy, but unproductive. It is difficult to find economic answers to questions if one assumes that the agents are acting against their own best interests. I do not claim that economics has all of the answers, but shouldn’t we continue to try to explain these phenomona under the assumption of rationality? How about this. In each case, the people making these arguments are acting in their own best interest. Sure, none of these policies are in the long-run interest of the country, but who, outside of university faculty, have the job security that allows them to put the long run (i.e. infinite horizon, overlapping generations, etc.) ahead of the short run. In the short run, politically, most people must fight to make sure the human capital they spent decades accumulating maintains its value. This leads to anti-foreign, make-work, and anti-market bias. The pessimistic bias is defensive. Politically, it is always good to give others the impression you are willing to fight to keep what you have. The best way to convince people of this is to tell them how bad things are. It seems that people are rational (and not biased), but Caplan is urging them to put their own best interests aside and push for programs that will help economic growth and future generations. If they acted accordingly, what economic model would explain that behavior? I think, it is then that we would have to put our economics aside and look for explanations based in irrationality.

]]> By: Trade Diversion http://www.overcomingbias.com/2006/11/the_big_four_ec.html#comment-424282 Trade Diversion Mon, 29 Jan 2007 17:43:31 +0000 http://prod.ob.trike.com.au/2006/11/are-the-big-four-econ-errors-biases.html#comment-424282 <strong>NYT: "The U.S. Is Losing Market Share. So What?"</strong> Prosperity and economic logic contend with a bit of hysteria and xenophobia: The United States is losing market share in the global economy, and that is not necessarily a bad thing... Ultimately, the decline of economic pre-eminence may be more damagin... NYT: “The U.S. Is Losing Market Share. So What?”

Prosperity and economic logic contend with a bit of hysteria and xenophobia: The United States is losing market share in the global economy, and that is not necessarily a bad thing… Ultimately, the decline of economic pre-eminence may be more damagin…

]]> By: lollerkeet http://www.overcomingbias.com/2006/11/the_big_four_ec.html#comment-424280 lollerkeet Fri, 15 Dec 2006 03:21:22 +0000 http://prod.ob.trike.com.au/2006/11/are-the-big-four-econ-errors-biases.html#comment-424280 (Crossposted from http://blog.sciam.com/index.php?title=which_is_more_plausible_string_theory_or&more=1&c=1&tb=1&pb=1&ref=rss) Physicists have more credibility. Physics is a science. The pronouncements of physicists are testable and falsifiable. Economics as it stands today is little more than an extension and justification of big business. Economics more closely resembles creationism than science. The fact thabt creationists have been maintaining the same line for years does not make them more credible - it does the opposite. (Crossposted from http://blog.sciam.com/index.php?title=which_is_more_plausible_string_theory_or&more=1&c=1&tb=1&pb=1&ref=rss)

Physicists have more credibility. Physics is a science. The pronouncements of physicists are testable and falsifiable.

Economics as it stands today is little more than an extension and justification of big business. Economics more closely resembles creationism than science. The fact thabt creationists have been maintaining the same line for years does not make them more credible – it does the opposite.

]]> By: conchis http://www.overcomingbias.com/2006/11/the_big_four_ec.html#comment-424279 conchis Mon, 11 Dec 2006 17:17:07 +0000 http://prod.ob.trike.com.au/2006/11/are-the-big-four-econ-errors-biases.html#comment-424279 Isn't this perfectly rational Bayesianism? People come to economics with stronger priors than they do to physics. Given that, it seems unsurprising that they update their beliefs more slowly for the former than the latter. Isn’t this perfectly rational Bayesianism? People come to economics with stronger priors than they do to physics. Given that, it seems unsurprising that they update their beliefs more slowly for the former than the latter.

]]> By: Robin Hanson http://www.overcomingbias.com/2006/11/the_big_four_ec.html#comment-424278 Robin Hanson Sun, 10 Dec 2006 01:41:01 +0000 http://prod.ob.trike.com.au/2006/11/are-the-big-four-econ-errors-biases.html#comment-424278 Wells and Flathead, in every economics course I discuss ad naseum differences between simple supply and demand and the real world. You would hear the most about employment in a labor economics course. Friction is a very simple concept, appropriate for a 101 course; it is hardly a exhaustive list of all things wrong with simple physics models. Wells and Flathead, in every economics course I discuss ad naseum differences between simple supply and demand and the real world. You would hear the most about employment in a labor economics course. Friction is a very simple concept, appropriate for a 101 course; it is hardly a exhaustive list of all things wrong with simple physics models.

]]> By: Wells. http://www.overcomingbias.com/2006/11/the_big_four_ec.html#comment-424277 Wells. Sat, 09 Dec 2006 19:58:17 +0000 http://prod.ob.trike.com.au/2006/11/are-the-big-four-econ-errors-biases.html#comment-424277 I'd like to hear professor hanson's response to Flathead. I’d like to hear professor hanson’s response to Flathead.

]]> By: Joel W http://www.overcomingbias.com/2006/11/the_big_four_ec.html#comment-424276 Joel W Wed, 06 Dec 2006 02:54:17 +0000 http://prod.ob.trike.com.au/2006/11/are-the-big-four-econ-errors-biases.html#comment-424276 Professor Hanson: Fair enough. The sign of the change in unemployment from a $2 an hour minimum wage increase isn't an issue that most people care about, compared to the magnitude. As Ezra Klein points out, people care about pronouncements by economists that are going to affect their lives. Perhaps the people who care the most about signs without magnitudes are graduate students working through comparative statics problems... Professor Hanson: Fair enough. The sign of the change in unemployment from a $2 an hour minimum wage increase isn’t an issue that most people care about, compared to the magnitude. As Ezra Klein points out, people care about pronouncements by economists that are going to affect their lives. Perhaps the people who care the most about signs without magnitudes are graduate students working through comparative statics problems…

]]> By: Cosmic Variance http://www.overcomingbias.com/2006/11/the_big_four_ec.html#comment-424283 Cosmic Variance Tue, 05 Dec 2006 19:28:11 +0000 http://prod.ob.trike.com.au/2006/11/are-the-big-four-econ-errors-biases.html#comment-424283 <strong>Economics vs. Physics Love-Off</strong> Who gets more love, economists or physicists? Robin Hanson stamps his foot in frustration at the lack of respect economists receive, in a nicely self-undermining blurb (via Ezra Klein): Consider how differently the public treats physics and economic... Economics vs. Physics Love-Off

Who gets more love, economists or physicists? Robin Hanson stamps his foot in frustration at the lack of respect economists receive, in a nicely self-undermining blurb (via Ezra Klein):
Consider how differently the public treats physics and economic…

]]> By: Robin Hanson http://www.overcomingbias.com/2006/11/the_big_four_ec.html#comment-424275 Robin Hanson Tue, 05 Dec 2006 02:36:25 +0000 http://prod.ob.trike.com.au/2006/11/are-the-big-four-econ-errors-biases.html#comment-424275 Joel, I am primarily responding to complaints that I misrepresented economists by claiming a consensus that "a minimum wage raises unemployment." For that dispute the sign is the main issue. I did not discuss whether a minimum wage is a good idea or not. Joel, I am primarily responding to complaints that I misrepresented economists by claiming a consensus that “a minimum wage raises unemployment.” For that dispute the sign is the main issue. I did not discuss whether a minimum wage is a good idea or not.

]]> By: Joel W http://www.overcomingbias.com/2006/11/the_big_four_ec.html#comment-424274 Joel W Mon, 04 Dec 2006 22:39:03 +0000 http://prod.ob.trike.com.au/2006/11/are-the-big-four-econ-errors-biases.html#comment-424274 Professor Hanson- even though the petition mentioned did not claim that minimum wages increase employment, it does claim that the effects of the minimum wage on unemployment are likely to be very small to zero. The magnitude is what counts, not the sign. Given enough data, you will discover that almost every relationship is statistically different from 0. However, that does not imply that every relationship is meaningfully different from 0. This gets back to the idea that an effect that you believe with a high degree of confidence is very small and negative is much better described by "approximately zero" than "negative", though "negative but very small" is the most accurate description. Professor Hanson- even though the petition mentioned did not claim that minimum wages increase employment, it does claim that the effects of the minimum wage on unemployment are likely to be very small to zero. The magnitude is what counts, not the sign. Given enough data, you will discover that almost every relationship is statistically different from 0. However, that does not imply that every relationship is meaningfully different from 0.

This gets back to the idea that an effect that you believe with a high degree of confidence is very small and negative is much better described by “approximately zero” than “negative”, though “negative but very small” is the most accurate description.

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