Comments on: weekly news

By: E.

E. — Sun, 03 Jan 2010 01:53:09 +0000

I’m not good with economics either, but I know that the psychologist John Kahnemann won the nobel prize for economics in the year 2002. I will quote from the German Wikipedia article:

Die zugrundeliegende Theorie – die „Prospect Theory“ – entwickelte der Wissenschaftler zusammen mit Amos Tversky. Bekannt wurden vor allem seine Arbeiten zu Urteilsheuristiken und kognitiven Verzerrungen.

I heard a speech about the works of Kahnemann on the ICC in Berlin, and I think he did a lot of game theoretical work as well.

Another example of “irrational behaviour” in game-theoretic paradigms clearly is behaviour found in psychological games like the cascaded prisoner dilemma: e.g. (A) decides how 10€ are split up between (A) and (B), and the only thing (B) can do is accept or deny. People tend to deny less than 3€ on average – which is clearly irrational behavior. The paradigms are set up that people don’t know who the other person is, and are 100% sure that they will receive the money after the trials (control questionnaire later, other people excluded from studies). So people rather take 0€ than 3€. There are evolutionary theories for punishing anti-group behaviour, but for a single person – the basis of economic thinking – that kind of behaviour not uncommon in psychology is irrational.

Not sure if I was able to answer your question, but that’s what I know. And you are ofc right, game theory *did* improve predictions tremendously. But as far as I know, adding the irrational component (homo economicus vs. homo what-ever-you-may-call-him) made the predictions even more precise.

By: Thomas

Thomas — Sat, 02 Jan 2010 10:29:25 +0000

Thing have always been complicated. And it’s totally natural to use crude approximations and assumptions. And different people have different views on the world. However, when people first make a statement like “if people have more money, people spend more money” and later say “yeah, but not in this case”, I don’t believe them until they proof it or at least give a really good argument. It appears to me that certain parties only argue so furiousely against that new law because they didn’t have the chance to propose it themselves (It’s only right when we do it).

By the way: As far as I know, predictions of the behavior of economical agents improved tremendously, since rational behavior has been assumed (Game Theory, von Neumann). But that may, admittedly, not be the state of art in economy. I would be very interested if you can tell me how irrational behavior can regarded in predictions (and what irrational behavior actually is – in a scientific meaning).

By: E.

E. — Fri, 01 Jan 2010 23:31:53 +0000

well, maybe things got more complicated? i am not big economist really. but to be very honest, predictions in economy started getting more adequate the more psychology was involved – people are not rational, they are human.

the same thing works for politicians. well, for everybody.

and regarding things that should be done as rationally as possible, that is clearly a bad thing.

By: Denis

Denis — Wed, 30 Dec 2009 19:55:09 +0000

I don’t really beleave in this “let’s spend all our money and everything’s alright” economic theory. It would be far to easy if printing and spending money would be the way to get a growing economy. Just have a look at the early 90s in Germany. That’s what happend in these years and all we got now, is a billion more depts. Of course it’s a different picture during an economic crisis as it happens twice a century. We could make an exception here. But in the long run, it doesn’t help us much if people spend 20€ more a month. Especially not in Germany where about 50% of our GDP depends on exports (figures differ a bit but it’s quite a lot anyway).
The big problem is, that dealing with politicians is dealing with non-rational persons in the economic point of view. That’s why the NEVER save money, but liked spending a lot since they’re no more monarchs who thought of state’s money as their own property.

By: Thomas

Thomas — Sat, 26 Dec 2009 09:19:31 +0000

@Eiko: There something I don’t understand: When the labor unions fight for higher wages, they (and political parties they are associated with) always argue that people would spend more money if they only got some more. And that would boost our economy. But then, the very same people argue that families that get more kinder geld per child will not spend but save the money. Where is the logic in that?

By: E.

E. — Mon, 21 Dec 2009 09:59:37 +0000

@ Thomas: so let’s keep the coal and oil down there until we need it :) … in the time when solar cells don’t work anymore, because the earth is clouded by apocalyptic radiation-dust and the four horses are lose :p

@ Franz: Yes yes, I see your point. And you know that you can’t be sure about that. Many economists say the opposite of what you say. Of course people need to spend money. But many people have enough money to spend money in Germany, the problem is that they don’t.
20 Euros more per child? Noone is gonna spend that money. It’s a freaking waste.
And: yes, it is sad indeed.