The Economic Way of Thinking
Published by Michael Greinecker on Tuesday, April 08, 2008 at 14:42What should one learn in a principles course? Here´s what I think is really essential:
- Many social phenomena can be explained by preferences, beliefs and constraints.
- There´s a difference between causality and correlation.
- What is individually rational may be bad in the aggregate.
- Aggregate behavior can differ much from individual behavior.
- Wether a threat is credible depends on wether one would want to enforce the threat.
- A social situation with large unexhausted profit possibilities is not likely to persist.
- Cooperation is often hard to sustain and requires clever incentive schemes.
Actually, this stuff should be thaught in highscool.
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>> "There´s a difference between causality and causation."
??? Reference? Comment?
>> "Aggregate behavior can differ much from individual behavior."
Differ how? No WARP in aggregate? No 2nd theorem?
>> "[..] this stuff should be thaught in highscool"
Michael G. for World President!
Michael G. for World President!
"??? Reference? Comment?"
Here´s my favorite example: If there are many people waiting at the bus station, it is a good sign that the bus will come soon. The two things are highly correlated. But if you come with many friends to the bus station, the bus isn#t going to come any sooner. There is no causal chain.
"Differ how? No WARP in aggregate? No 2nd theorem?"
Well, I think it´s good to know that WARP doesn't have to hold in the aggregate, but that´s too highlevel for a principles course. But I have other examples in mind. Like the random consumption model of Becker in which agents simply exhaust their budget randomly. Expected (and for many people average) demand looks like the standard textbook stuff. I think these insights are important.
"Michael G. for World President!"
I´m honoured, but do you really want a technocratic leftist for world president?
Is there a principles book compatible with these requirements? Bowles? Frank?
Oh, so when you wrote "causality and causation" you meant "causality and correlation".
>> "I´m honoured, but do you really want a technocratic leftist for world president?"
Ideology doesn't matter. I would have connection in high places and I could get you to give us a deserted island for social experimentation.
"Is there a principles book compatible with these requirements? Bowles? Frank?"
I don't know any.
"Oh, so when you wrote "causality and causation" you meant "causality and correlation"."
Yes. *correcting*
"I would have connection in high places and I could get you to give us a deserted island for social experimentation."
Great idea.
My me-too post. Gratuitous self-promotion.
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