The Root of the Problem

Here’s why behavioral economics is slow to take off:

More and more, I am thinking about this area in terms of the normative vision of the world it presupposes. Most amazingly, behavioral economists tend to accept the normative stance of neoclassical or standard economics (that is, the axioms of rationality). They “simply” do not . . . → Read More: The Root of the Problem

The costs in buying versus the costs in selling

All models are wrong, some models are useful. A model reduces complications that are true in return for tractability and insight. In finance, all too often, one complication which has been wished away is transactions costs. A great deal of what we see in the world around us is caused by the costs of . . . → Read More: The costs in buying versus the costs in selling

This Explains a Lot

Paul Krugman, on Asimov’s Foundation trilogy:

I first read them when I was a teenager. I was really inspired by the psychohistorians, who used statistics and social sciences to predict the future. I knew it was fiction, but what really struck me is the notion that the science of what people do could be . . . → Read More: This Explains a Lot

Economic Models and Forecasting

Recently, I’ve been thinking a lot about how pointless economic models are.  A good portion of this is probably due to being in a college microeconomics class (which uses Mankiw’s book, which Vox picks apart here.).  What passes for mainstream economics is nothing more than gussied-up tautologies and pretty models that don’t actually prove . . . → Read More: Economic Models and Forecasting