Is this why it is all failing?

Yahew

Suryavarman wrote: »

I'm sure RichieC was claiming that income was shrinking for wage earners.

The graph was titled badly on the top, at the side it said middle class share of income.

It has to be taken into account that household size has also been shrinking which would cause household income to shrink even though individual income might be the same. This could be because of retirees living in their own house instead of living with children and numerous other factors.

Thats an excuse, though, since the cause could be the other way - less money, fewer kids. The soviet Union stagnated in per capita income from 1970 until it's collapse. The number of children per household no doubt also declined. Since children are non-earners this is not an argument. Wokers are producing more wealth per capita, and less of it is being earned as wages, more as capital.

vard

They don't correlate. If you study, work hard, put in the effort or happen to be particularly intelligent you will get good grades. You deserve these good grades.

The size of your monetary worth is rarely an indicator of how intelligent you are, how hard you've worked, or how much you deserve it.

benway

johnnyskeleton wrote: »

Haven't they carried out empirical studies on game theory / the prisoners dillema and found that, contrary to the expected result that everyone looks out for their own self interest, most people instinctively act in thr manner which is mutually beneficial? The results were criticised by the proponents of game theory etc as not reflecting real life situations. But essentially, while these anecdotes have an important message, they are only an illustration and should not be held out as axiomatic.

The homo economicus, selfishness-based model ... y'know, the centre piece of most canonical economics and the core political assumption of the libertarian right (c/f Ayn Rand) has no basis in fact, and should have been completely discredited by this stage. It. Does. Not. Work.

But you still regularly see people coming out with stuff like, "fear and greed is human nature" as if this were an obvious fact.

http://www.sscnet.ucla.edu/anthro/faculty/boyd/MacGamesBBSFinal.pdf

Ostrom

The point of the prisoners dilemma is not that it represents a deep fundamental of human action (i.e. inherent tendency toward maximisation), but that it approximates many real-world situations where individually rational strategies lead to collectively irrational outcomes, and therefore that cooperation is impossible.

It is a flawed assumption, insofar as it is assumed to be transhistorical - in human ecology, many studies have shown that collective resource management systems lead to the opposite (i.e. under differing property regimes, collective arrnagements exist which have lasted hundreds of years). In its ideal form, it also assumes both parties possess complete information, and that all parties are aware both of the game structure and potential results of differing strategies, which is often a poor approximation of reality.

benway

Isn't it a thing that it's used to "scientifically" underpin a Hayekian notion that a society of individuals purely seeking their own gratification will reach a stable equilibrium?

I sometimes wonder if there's a cultural drive in the west to try to make us behave more like homo economicus, for that reason - because this model makes the equations work, and the equations say that if everyone behaved like this it would resullt in a stable equilibrium, with the added bonus that people's behaviour would be 100% predictable. I tend to place the greed is good - religion and "do-gooding" are bad tendencies in our culture in this context. Maybe I'm just a big conspiracy theorist like that.

Of course, real people behave nothing like this.

Also, is it not a thing that once people co-operate, to varying degrees, the results become unpredictable and unstable? I have read a bit of this puzzle of altruism stuff, especially the game theory side of it, but I'm not as well up on it as I'd like to be.

SupaNova

benway wrote: »

I sometimes wonder if there's a cultural drive in the west to try to make us behave more like homo economicus, for that reason - because this model makes the equations work, and the equations say that if everyone behaved like this it would resullt in a stable equilibrium, with the added bonus that people's behaviour would be 100% predictable. I tend to place the greed is good - religion and "do-gooding" are bad tendencies in our culture in this context. Maybe I'm just a big conspiracy theorist like that.

I don't know if you are a conspiracy theorist but it is quite clear you know nothing about Hayek.

benway

Many economic classical liberals, such as Hayek, have argued that market economies are creative of a spontaneous order, "a more efficient allocation of societal resources than any design could achieve."[5] They claim this spontaneous order (referred to as the extended order in Hayek's "The Fatal Conceit") is superior to any order human mind can design due to the specifics of the information required.[6] Centralized statistical data cannot convey this information because the statistics are created by abstracting away from the particulars of the situation.[7]

http://en.wikipedia.org/wiki/Spontaneous_order

Would find a better link, but it's too early in the morning. Hayekian spontaneous order of rational self-interested actors is what I'm talking about. It's only the "scientific" underpinning for the idea that unregulated markets are "more efficient" and that it would be possible to all but do away with the state without things descending into chaos. Both dubious claims, given the events of the past decade and the conceptual weakness of the homo economic model.

Or are you only into anti-socialist polemics like the Road to Serfdom?

SupaNova

Its quite clear your knowledge of Hayek is little more than a Wikipedia page or two. If its not, maybe you can explain how you jumped from the idea of spontaneous order to the following nonsense?

I sometimes wonder if there's a cultural drive in the west to try to make us behave more like homo economicus, for that reason - because this model makes the equations work, and the equations say that if everyone behaved like this it would resullt in a stable equilibrium, with the added bonus that people's behaviour would be 100% predictable. I tend to place the greed is good - religion and "do-gooding" are bad tendencies in our culture in this context.

benway

Touchy, defensive libertarian is touchy and defensive. What's the matter, chief? Afraid that the theoretical underpinnings of your belief set may not stand up to close scrutiny?

And, seeing as you seemed not to even know of the idea I was talking about, I'd thank you to stop being so snooty. If my knowledge of Hayek is really so patchy, why don't you set me straight, then?

It relates because the underpinning of that idea, and the "proof", via game theory, depends on the homo economicus model - rational, selfish, etc, etc

You are familiar with homo economicus, aren't you?

Problem is that people don't behave like homo economicus in the slightest, and my inner conspiracy theorist makes me think that a concerted cultural attempt is being made to make us fit that model. This is pure idle speculation, btw ...

SupaNova

benway wrote: »

You are familiar with homo economicus, aren't you?

Yes, it's the other nonsense you attribute to the theory I was referring to, stable equilibrium, 100% predictability, all to fit equations, of a simplistic model??? I'm baffled as to whether you are actually talking about Hayek, seriously.:)

benway

http://gametheory101.com/

Game theory provided the "proof" that Hayek's spontaneous order could work. Its core assumption is the rational, self-interested actor, aka homo economicus.

As I understand it, the Nash equilibrium is taken as the evidence that a system of individuals relentlessly pursuing their own rational interests will be stable. If each individual relentlessly pursues their own interests, they will be 100% predictable. Open to correction on this, of course, it's all independent learning rather than something I've been taught at any stage.

Game theory is a big, big idea ... big enough that Hollywood turned the spiky, eccentric Nash, who coincidentally or otherwise suffered from paranoid delusional schizophrenia, into a tragic hero played by Russell Crowe in A Beautiful Mind.

SupaNova

benway wrote: »

As I understand it, the Nash equilibrium is taken as the evidence that a system of individuals relentlessly pursuing their own rational interests will be stable. If each individual relentlessly pursues their own interests, they will be 100% predictable. Open to correction on this, of course, it's all independent learning rather than something I've been taught at any stage.

I really don't know where you are getting this from. It is not from Hayek's work or anyone from the Austrian School. What your attributing to Hayek must be from a long chain of second hand accounts of his work where each person in the chain misinterpreted or deliberately misrepresented Hayek by a wide mark. Nash equilibrium is not something given much time to by Austrian economists and is completely separate from the concept of spontaneous order. Then the bolded bit I honestly don't know how anyone could get that from Hayek's work, it's a million miles in the opposite direction of Hayek's or Austrian economists view of the economy. If you actually decide to familiarize yourself with the work of Austrian economists, you will find a sizeable chunk of writing dedicated to uncertainty, and almost zero to the idea of 100% predictability of economic agents.

benway

Hayekian = derived from Hayek, not part of his own corpus, or even his milieu. Just like a Foucauldian analysis doesn't have to have been written by Foucault. The point here is game theory and spontaneous order, and like it or not Hayek is the leading 20th century proponent of the latter. For a good, accessible example of the general direction, see:

ftp://www.econ.bgu.ac.il/courses/Institutional_Economics_in_Historical_Perspective/readings/Week3_Sugden_1989.pdf

Here's another one for you, seeing as you're so caught up on those wacky Austrians:

http://www.druid.dk/wp/pdf_files/98-28.pdf

SupaNova

benway wrote: »

Hayekian = derived from Hayek, not part of his own corpus, or even his milieu. Just like a Foucauldian analysis doesn't have to have been written by Foucault.

Sorry to disappoint but this doesn't change my points, as you still have attributed stuff to Hayek that is polar opposite to his view.

SupaNova

benway wrote: »

The point here is game theory and spontaneous order, and like it or not Hayek is the leading 20th century proponent of the latter. For a good, accessible example of the general direction, see:

ftp://www.econ.bgu.ac.il/courses/Institutional_Economics_in_Historical_Perspective/readings/Week3_Sugden_1989.pdf

Here's another one for you, seeing as you're so caught up on those wacky Austrians:

http://www.druid.dk/wp/pdf_files/98-28.pdf

Had a very quick flick through, not sure what you are getting at. What is your personal opinion, that game theory backs up spontaneous order, and Austrian's should incorporate it?

EDIT: Also genuinely curious to know why you consider Austrians wacky?

benway

The only idea I attributed to Hayek was spontaneous order. Simple question - when I say spontaneous order, what's the first name that comes to mind? Q.E.D.

The rest is standard model game theory - the strong, Beautiful Mind model. I realise that there have been developments since, evolutionary game theory and the like, in response to criticisms like those I raised above. Like it or not, game theory has been far more influential in the past quarter century than orthodox Austrian economics.

I agree with this analysis, mind you, even if it is an earlier form of game theory that's referred to:

... there is no definite gap between the Hayekian approach to [economic knowledge and market processes] and this (Morgenstern and Von Neumann) branch of game theory ....

I like that your radar goes haywire at the slightest hint of a criticism of old Freddy, but this is about game theory and spontaneous order, not What Would Friedrich Do?

***

SupaNova wrote: »

What is your personal opinion, that game theory backs up spontaneous order, and Austrian's should incorporate it?

Personally, I treat any theory of human behaviour which lays claim to scientific rigour with circumspection at best. I generally find that when such a theory is presented as an ahistorical, apolitical fact of nature, there's normally a historically specific political agenda behind it.

This includes most economics, including the Austrians (wacky was just a turn of phrase). Don't get me wrong, I'm in awe of the mathematical achievements, but they're essentially parlour tricks. We don't know enough about human nature, if in fact such a thing exists, which I personally doubt very much, to begin to accurately model it. So, the models depend on simplistic assumptions like homo economicus, and watered-down versions like bounded rationality, to make them work.

What about power? I'm with Foucault all the way on this.

It's therefore unsurprising to me that economists have been unable to adequately address the current crisis of capitalism and its causes by reference to their narrow, pseudo-scientific worldview:

http://www.iasc-culture.org/publications_article_2010_Summer_mirowski.php

In that vein I think that the ideal of spontaneous order is cornerstone of the anti-state discourse that's risen since the 70s, as the strong states necessary for total war, and for post-war recovery, were picked apart by powerful private interests, moving towards an almost feudal model of massive corporate fiefdoms. It serves a political agenda, simple as that.

I personally think that a robust, functioning state is a necessary bulwark against powerful private interests ... as do, I think those very private interests, and this is why they're set on undermining it. Take a look at the kinds of spurious attacks that the O'Reilly media run day-in, day-out, for example.

Funnily enough, I drifted from a leftist counter-cultural suspicion of the state towards a spontaneous order, cultural evolution type viewpoint in my early twenties, looking for a utopia without top-down control. This which is when I did most of my reading on this stuff, but ultimately came to the conclusion that the theory is flawed beyond repair, and the practice serves the interests of private sector players. I still find game theory fascinating, must get back into it, my Masters was very much based on traditional social "science".

For me, a statist solution is the lesser of two evils, by far - entrenched power will always exist, but the state serves to negotiate between powerful and powerless, which its why it's evolved. Also, as should be clear in 2012, an unregulated market society will inevitably collapse into chaos without state intervention.

[/ramble]

tl;dr

I don't believe that spontaneous order will emerge in an unregulated society, I think that the removal of formal regulation and intervention will lead to a tyranny of the strongest players in the given society rather than some utopian community of free individuals.

SupaNova

I don't deny that other schools of economic thought have been far more influential, nor am I personally upset by it. Despite other schools and branches having the benefit of being in fashion far more than the Austrian School over the last quarter of a century, they have been pretty dismal in furthering our understanding of economic phenomena, mathematical modelling being the most fruitless of all. Since game theory seems to be your fetish, and it has been in vogue the last quarter of a century, maybe you can enlighten me to some of its achievements or breakthroughs?

And don't worry I'm not upset if Freddy gets criticized.

SupaNova

I'm not going to respond to everything you posted, as some of it would be hair splitting and some I agree with.

benway wrote: »

This includes most economics, including the Austrians (wacky was just a turn of phrase). Don't get me wrong, I'm in awe of the mathematical achievements, but they're essentially parlour tricks. We don't know enough about human nature, if in fact such a thing exists, which I personally doubt very much, to begin to accurately model it. So, the models depend on simplistic assumptions like homo economicus, and watered-down versions like bounded rationality, to make them work.

We had a debate on economic modelling very recently where you can see what side of the debate I fall on. In short, I think it is delusional to think we can model a complex economy of billions of people interacting and cooperating, to form an intricate structure of production in a spontaneous manner.

Here is the thread anyway, start on page 3:
http://www.boards.ie/vbulletin/showthread.php?t=2056492366&page=3

In that vein I think that the ideal of spontaneous order is cornerstone of the anti-state discourse that's risen since the 70s, as the strong states necessary for total war, and for post-war recovery, were picked apart by powerful private interests, moving towards an almost feudal model of massive corporate fiefdoms. It serves a political agenda, simple as that.

Spontaneous order is all around us, and the market the most fascinating of all. Its not a case of spontaneous order or the state, spontaneous order will occur either way. I always think of the Leanord Read's 'I Pencil' essay, when talking about this kind of thing, here is a nice version from Sheldon Richman:
http://www.thefreemanonline.org/columns/perspective/i-pencil-revisited/

I personally think that a robust, functioning state is a necessary bulwark against powerful private interests ... as do, I think those very private interests, and this is why they're set on undermining it. Take a look at the kinds of spurious attacks that the O'Reilly media run day-in, day-out, for example.

I would agree the state, as we know it, is necessary in our current world, and will be for the foreseeable future. Will it always be necessary, who knows.

Funnily enough, I drifted from a leftist counter-cultural suspicion of the state towards a spontaneous order, cultural evolution type viewpoint in my early twenties, looking for a utopia without top-down control. This which is when I did most of my reading on this stuff, but ultimately came to the conclusion that the theory is flawed beyond repair, and the practice serves the interests of private sector players. I still find game theory fascinating, must get back into it, my Masters was very much based on traditional social "science".

I would have never guessed:P. I will have a proper read of the articles you linked when I get a chance, they looked interesting from the brief flick through I had.

For me, a statist solution is the lesser of two evils, by far - entrenched power will always exist, but the state serves to negotiate between powerful and powerless, which its why it's evolved. Also, as should be clear in 2012, an unregulated market society will inevitably collapse into chaos without state intervention.

Austrian's make a strong argument that it is continued state intervention via central banking that primarily causes booms in the first place, which will inevitably end with a bust. But that's for another day.