The assault on homo-economicus
Interesting article proclaiming the end of “homo-economicus” (ht Economist’s View). This is an issue I care about a lot – so one day I’ll attempt to discuss the article in some detail. Today however, I’m just linking to the article and waiting to see what interesting comments you guys have about it 😉
It also reminds me of this awesome comic from XKCD:
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Source XKCD
It seems to me that the science of economics. If you can call it a science…is struck (perhaps fatally) with “band wagonitis”.
The other flaw is the inability to truly test one’s hypothesis in an experimental sense (at least in the macroeconomic sphere at least). This seems to me like a fundamental limitation of the discipline. After all we don’t have a potted economy that an economist in academia can play god with.
Economists attempt to rationalise past this always leads to the same approach. That is the development of a model and with the best will in the world a model is only as good as the assumptions that go into it. The models are fantastic until some event comes along that wasn’t predicted and bang goes the model. (This is when you’ll hear pitiful excuses from the quants, “it was a one in 10,000 year event” etc…)
Tangentally, perhaps this is a lesson that the proponents of global warming would do well to learn from as they too suffer from a large reliance on modelling.
no comments – I’m curious whether the professionals are up to critiquing their own profession.
Come on guys – there are plenty of mea culpa’s to go around 😉
@SimonD
Thanks for the reminder SimonD – I’ll get to writing a reply comment at some point today. Sadly I’m a touch busy – hence the large response delays 🙂
@SimonD
Hi Simon,
I can finally reply 🙂
“It seems to me that the science of economics. If you can call it a science…is struck (perhaps fatally) with “band wagonitis””
I think it is important to split economics in the sense that many people see it and “economic science”. The science aspect is merely the creation of an objective framework to put issues into – it gives no conclusion, no prescriptions.
The band wagon effect you are talking about stems from the application of this framework – and it is a critique of the value judgments economists make when they apply the framework. Now this criticism is valid – but we have to be clear it is a critique of THESE ECONOMISTS – not of economic science itself.
“The other flaw is the inability to truly test one’s hypothesis in an experimental sense”
Agreed – it will be a big step forward when we can test our psychological priors.
“The models are fantastic until some event comes along that wasn’t predicted and bang goes the model”
Indeed – this was something we learned in the 1970’s. This is why we always try to frame the data with the “framework of economic science”.