It ain’t ignorance causes so much trouble; it’s folks knowing so much that ain’t so. Josh Billings Economics is important. So the world could use more of it. In the same sense, ignorance of economics is even more important. That is, the world could even more use a better understanding of how ignorant it is about economics. Let me explain.
My personal experience is very different than the advice of this post might indicate. For instance, after coming to the asset management business from computer science, I was shocked at the poor statistical inference practices I saw. Everything is based on t-statistics and arbitrary cut-offs for significance. Many models are evaluated and chosen using only "first principles" and econ intuition. And there's an open culture about the fact that this intuitive style that lacks rigor is clearly bad, clearly suboptimal, clearly could be improved with minimal effort, clearly not cost effective. But incentive schemes make it very lucrative for those who can wheel and deal in the low-quality inference jargon, who can data mine for significance but put spin and marketing on it to appear very credible. I've seen many successful modeling techniques from Bayesian inference and machine learning just tossed aside, almost laughably, because how would anyone ever explain the "first principles" or "intuitive" reason why it did not work in some period?
I may only have limited exposure, but my take away has been this: economics seems to be a special case of a signal processing problem, and the modeling motivations that underlie much of the math and computer science literature on signal processing, statistical learning, and Bayesian inference seem to utterly subsume and supersede any of the econ or market first principles that are widely trumped up. But those are not as easy to sell as simplistic stories about overreaction/underreaction, micro to macro aggregation stories, etc., so they collect dust on the shelf despite being more accurate tools with strictly better info about what they seek to model.
Many engineers of my experience have limited understanding of cost-effectiveness, opportunity cost, marginal costs or any strategic problem as opposed to merely decision problem. Doubly so if the problem is outside their own speciality.
I work with them all the time and they make brilliant things which are terrible allocations of resources.
State make money through taxation. That shouldn't be news to people.
Taxing gasoline is just part of it. It's even relatively clever because we want people to make choice that burn less gasoline and therefore produce less CO2 emissions.
The only data he would need is something showing that economics, as a science, is correct more often than human intuition is correct, and is more verifiable than human intuition is—thus showing that being less ignorant of economics and more skeptical of human intuition is a good thing to do. Then, according to you, he would cease to be "another person with an opinion." (Is this data you really need to see outside of actually reading some economics-related literature?)
If you're genuinely questioning the validity of the data upon which this post is based, then do some simple economics-related reading.
If you're *not* questioning the validity of the data upon which this post is based, then your response is... well... irrelevant.
I can assure you, the necessary data is available in such easily accessible, voluminous amounts, that mentioning it would have been totally excessive–especially in a website where the field of economics already plays a huge role.
My suspicion is that you didn't think your post through, and used the quote only to justify a gut (might I say: intuitive) feeling of "I don't want to believe this!"
To the extent that economics makes surprising corrections to common intuitions about human behavior, these can be communicated via various entertaining demonstrations / experiments, starting even with very young children.
There are lots of forms this might take - classroom surveys, viewing videos, thought experiments, etc.
Two examples: 1) I found the thought experiments concerning decision-making in Daniel Kahneman's book 'Thinking, Fast & Slow' fascinating, especially those I fell for. 2) The well known basketball/focus-of-attention clip shows how indelibly a short video can correct common intuitions in the area of human perception (this example strays beyond economics, but that is beside the point).
You give examples like diminishing returns and auctions. Unfortunately, when people hear "economics", they think of macroeconomics, which is what's in the press.
I suspect the problem you are running into is more about branding than about real respect for expertise. Macroeconomics simply has not proven itself any better than faith crystals. On the other hand, the analytic methods you describe are extremely popular and are taught in MBA programs.
"People don't realize that they don't know medicine! Look at all the anti-vaccine people, the homeopaths, the naturopaths, the faith healers, and so on."
I disagree. People are fully aware that these things go against medical science (or that even when they do work the theories behind them are not scientific). People just don't trust medical science because it's big business (and to be fair big business and sloppy research do mean many medicines do not actually work or work as well as advertised, it's just that there is no conspiracy the other way around to suppress knowledge of the working of homeopathy etc... and that's where the people you mention become conspiracy nuts).
"These people are just as arrogant and ignorant as self-taught "economists" who think that inflation is currently above 10%, that cutting deficits is a good way to fight a recession, that productivity growth and free trade cost jobs, and other nonsense."
It's also people who think economics offers one size fits all answers as if they were laws of physics that are fooled. Cutting the import of foreign weapons is a way to cut your deficit without adverse effects on your economy, while stimulus without reforms to increase productivity will not cause significant long term growth, also free trade can most certainly cost jobs in the short and medium terms (and the medium term can be half a person's working lifetime) for at least one of the parties involved when the market value of the labor falls below the minimum wage in a richer country for example. Economic "laws" almost always come with conditions, assumptions and exceptions.
People don't realize that they don't know medicine! Look at all the anti-vaccine people, the homeopaths, the naturopaths, the faith healers, and so on. These people are just as arrogant and ignorant as self-taught "economists" who think that inflation is currently above 10%, that cutting deficits is a good way to fight a recession, that productivity growth and free trade cost jobs, and other nonsense.
The point about ignorance is well-taken ... but is economics (especially macro) really all that great? (Cf. Chapter 1 of "The Signal and the Noise".) Moreover, don't economists have the same cognitive biases and political prejudices that all people do? Thanks, but no thanks ... I'll just stick with my Humean intuitions, updating my priors when warranted
> Yes, even folks who do realize that economists know more may not have the time to ask about or learn economics.
This may be a problem of ignorance about the domain of economics. Anecdotally, I used to think that economists were basically people who did accounting for governments. Had I known going into college that economics was essentially an applied study of human behavior, I might have pursued a degree.
My personal experience is very different than the advice of this post might indicate. For instance, after coming to the asset management business from computer science, I was shocked at the poor statistical inference practices I saw. Everything is based on t-statistics and arbitrary cut-offs for significance. Many models are evaluated and chosen using only "first principles" and econ intuition. And there's an open culture about the fact that this intuitive style that lacks rigor is clearly bad, clearly suboptimal, clearly could be improved with minimal effort, clearly not cost effective. But incentive schemes make it very lucrative for those who can wheel and deal in the low-quality inference jargon, who can data mine for significance but put spin and marketing on it to appear very credible. I've seen many successful modeling techniques from Bayesian inference and machine learning just tossed aside, almost laughably, because how would anyone ever explain the "first principles" or "intuitive" reason why it did not work in some period?
I may only have limited exposure, but my take away has been this: economics seems to be a special case of a signal processing problem, and the modeling motivations that underlie much of the math and computer science literature on signal processing, statistical learning, and Bayesian inference seem to utterly subsume and supersede any of the econ or market first principles that are widely trumped up. But those are not as easy to sell as simplistic stories about overreaction/underreaction, micro to macro aggregation stories, etc., so they collect dust on the shelf despite being more accurate tools with strictly better info about what they seek to model.
The kind of sources that usually feature in American "debates", like the deep sea oil fields in the American part of the Gulf of Mexico.
Obviously :-)
I was trying to hint at the agglomeration error....the term "single source" is underdefined. A well? A basin? A country? A region?
Because there's more than one (actually a whole lot more than one) source in the area...
If no single source can affect the price, why are we all so worried about Straits of Hormuz?
Durn rebellious colonials! Huzzah for the King!
Seriously, both sides had a point. What would a "just compromise" have looked like?
Many engineers of my experience have limited understanding of cost-effectiveness, opportunity cost, marginal costs or any strategic problem as opposed to merely decision problem. Doubly so if the problem is outside their own speciality.
I work with them all the time and they make brilliant things which are terrible allocations of resources.
State make money through taxation. That shouldn't be news to people.
Taxing gasoline is just part of it. It's even relatively clever because we want people to make choice that burn less gasoline and therefore produce less CO2 emissions.
The only data he would need is something showing that economics, as a science, is correct more often than human intuition is correct, and is more verifiable than human intuition is—thus showing that being less ignorant of economics and more skeptical of human intuition is a good thing to do. Then, according to you, he would cease to be "another person with an opinion." (Is this data you really need to see outside of actually reading some economics-related literature?)
If you're genuinely questioning the validity of the data upon which this post is based, then do some simple economics-related reading.
If you're *not* questioning the validity of the data upon which this post is based, then your response is... well... irrelevant.
I can assure you, the necessary data is available in such easily accessible, voluminous amounts, that mentioning it would have been totally excessive–especially in a website where the field of economics already plays a huge role.
My suspicion is that you didn't think your post through, and used the quote only to justify a gut (might I say: intuitive) feeling of "I don't want to believe this!"
To the extent that economics makes surprising corrections to common intuitions about human behavior, these can be communicated via various entertaining demonstrations / experiments, starting even with very young children.
There are lots of forms this might take - classroom surveys, viewing videos, thought experiments, etc.
Two examples: 1) I found the thought experiments concerning decision-making in Daniel Kahneman's book 'Thinking, Fast & Slow' fascinating, especially those I fell for. 2) The well known basketball/focus-of-attention clip shows how indelibly a short video can correct common intuitions in the area of human perception (this example strays beyond economics, but that is beside the point).
Kind of ironic, given that Rothbard had loud, vociferous, ignorant opinions about economics himself.
You give examples like diminishing returns and auctions. Unfortunately, when people hear "economics", they think of macroeconomics, which is what's in the press.
I suspect the problem you are running into is more about branding than about real respect for expertise. Macroeconomics simply has not proven itself any better than faith crystals. On the other hand, the analytic methods you describe are extremely popular and are taught in MBA programs.
"People don't realize that they don't know medicine! Look at all the anti-vaccine people, the homeopaths, the naturopaths, the faith healers, and so on."
I disagree. People are fully aware that these things go against medical science (or that even when they do work the theories behind them are not scientific). People just don't trust medical science because it's big business (and to be fair big business and sloppy research do mean many medicines do not actually work or work as well as advertised, it's just that there is no conspiracy the other way around to suppress knowledge of the working of homeopathy etc... and that's where the people you mention become conspiracy nuts).
"These people are just as arrogant and ignorant as self-taught "economists" who think that inflation is currently above 10%, that cutting deficits is a good way to fight a recession, that productivity growth and free trade cost jobs, and other nonsense."
It's also people who think economics offers one size fits all answers as if they were laws of physics that are fooled. Cutting the import of foreign weapons is a way to cut your deficit without adverse effects on your economy, while stimulus without reforms to increase productivity will not cause significant long term growth, also free trade can most certainly cost jobs in the short and medium terms (and the medium term can be half a person's working lifetime) for at least one of the parties involved when the market value of the labor falls below the minimum wage in a richer country for example. Economic "laws" almost always come with conditions, assumptions and exceptions.
People don't realize that they don't know medicine! Look at all the anti-vaccine people, the homeopaths, the naturopaths, the faith healers, and so on. These people are just as arrogant and ignorant as self-taught "economists" who think that inflation is currently above 10%, that cutting deficits is a good way to fight a recession, that productivity growth and free trade cost jobs, and other nonsense.
The point about ignorance is well-taken ... but is economics (especially macro) really all that great? (Cf. Chapter 1 of "The Signal and the Noise".) Moreover, don't economists have the same cognitive biases and political prejudices that all people do? Thanks, but no thanks ... I'll just stick with my Humean intuitions, updating my priors when warranted
> Yes, even folks who do realize that economists know more may not have the time to ask about or learn economics.
This may be a problem of ignorance about the domain of economics. Anecdotally, I used to think that economists were basically people who did accounting for governments. Had I known going into college that economics was essentially an applied study of human behavior, I might have pursued a degree.