A physicist, a chemist and an economist drift to an island, hungry. Then a can floated on the surface of the sea. The physicist said: "We can apply momentum to the can with rocks, causing its surface to fatigue and break." "We can make a fire and heat the can so that it expands to rupture."" The economist says, "Suppose we have a screwdriver that opens a can..."
Economic jokes, in my perception, are second only to the Soviet joke series of jokes, how funny.
"Why I Like Economics," which I wrote a year ago, is still known to be occasionally liked, but for a year I have not said anything about economics (my impression is this).
What's going on in between?
I'm afraid I'm going to write another article to explain why I don't like economics.
In order to avoid being less like an unscrupulous title party, I decided to use "Why I Don't Like Economics Now" as the title.
This economic joke
Let's take a closer look at this joke:
Whether or not there is a problem with the physicists' and chemists' schemes, the economists' schemes are clearly untenable.
Because economists make a hypothesis, and this hypothesis obviously does not hold.
There are two basic assumptions of microeconomics:
Rational Man Hypothesis: The assumption of a rational man (economic man). Motivated by self-interest, we strive to pursue and obtain our greatest economic benefits at the least economic cost.
Full information assumes: Full information. Every economically active individual (i.e. buyer and seller) in the market has complete information on the relevant economic situation.
Let us touch our conscience and say, do these two hypotheses exist in the real world?
After reading a lot of books on psychology and behavioral economics, especially since I personally bought stocks, I have become very skeptical of the assumption that "people are rational" - people can hardly even be called rational most of the time, and reason only occasionally triumphs over sensibility and instinct.
(This does not mean that I am an outright admirer of reason, I am increasingly feeling the value of instinct and sensibility)
Eugene Fama even won the Nobel Prize in Economics based on this "efficient market hypothesis".
An efficient market is a market in which there are a large number of rational, profit-maximizing investors who actively participate in the competition, each of whom tries to predict the future market price of a single stock, and where everyone has easy access to important information about the present. In an efficient market, competition among numerous savvy investors has led to a situation in which, at any given time, the market price of a single stock reflects what has happened and what has not yet happened, but what the market expects to happen.
Simply put, prices reflect everything, and stocks can't make money.
Of course, in response to some doubts, economists also add to the two basic assumptions and the efficient market hypothesis, such as irrational people will quickly disappear by the leeks, and the most rational wave of people are getting richer and more able to determine prices...
But more than reason, I believe that blind obedience and going with the flow are instincts engraved in the bones of social animals.
Going back to that joke, does the economist's hypothesis make sense?
The meaning of economic assumptions
Economics intends to construct a strict and wonderful world in which everyone's actions are governed by reason, where information is transparent and flowing, where everything is traceable and predictable—a worldview that is essentially a mechanical worldview, elegant and fragile, and untestable.
But does the assumption that does not hold, or does not necessarily hold, mean that the hypothesis is meaningless? Mathematics is a good example.
There are many assumptions in mathematics, such as imaginary numbers that we have all learned, and even mathematics itself may be just an abstract hypothesis that exists only in the human mind.
But the assumptions in mathematics, such as the Euclidean geometry hypothesis, basically coincide with the real world, and the results of the inferences are basically consistent with the real world, the imaginary number does not exist, but as an intermediate tool can achieve the goal well, and the conclusion is basically consistent with the real world.
That is to say, if the conclusions arrived at by the hypothesis are basically consistent with the real world, the hypothesis itself can exist as an explanation of possibility; if the hypothesis itself is still substantially consistent with the real world, it is better accepted.
Going back to the assumptions of economics, rational people and complete information — I don't agree with the real world; the efficient market hypothesis — I don't agree with the real world either.
What do you think?
It seems to me that neither a hypothesis nor an inference is consistent with a theory of the real world, and its only remaining meaning is as a way of thinking.
The way economics thinks is actually very useful, although it is not enough to explain reality, but in some cases it can also be used to explain part of reality - and this theoretical system based on the expansion of game theory is at least groundbreaking.
According to my experience, the first understanding of economics will feel indescribably enlightened, feel that they have discovered the essence of the law of human social operation, and from then on take a hammer to see everything is a nail, thinking that economics can explain everything to solve everything; over time, you can feel its limitations, because too ideal is too rigid and reality has many deviations, explanatory power is also very poor, prediction is very poor, and even sometimes the opposite.
A branch of behavioral economics
The latest research results in economics, or award-winning achievements, have a surprising branch - behavioral economics.
Behavioral economics is an interdisciplinary discipline of psychology and economics, I think it is closer to psychology than economics, comparative behavioral economics is to study the characteristics of individual decision-making, and does not contain so-called assumptions.
The best thing about behavioral economics is that, without any assumptions, it is completely from the perspective of individual behavior, from social experiments, to explain social phenomena, to provide solutions, to predict individual behavior.
I'm something I love: starting from reality and settling into reality.
Isn't that more interesting and practical than making a hypothesis and then pushing out an what hypothesis and then finding it unreliable?
The recommended book here, "The Discovery of Thinking", tells the story of two Nobel laureates who started a sect all the way, and if you are interested, you can continue to read some books on behavioral economics.
Branches are not repeated here.
At last
The airport code word has now set the sun, and it is a simple end.
Economics as a hypothesis-based discipline, as a way of thinking is OK, explain the world looks good, provide a lot of poor solutions, predict the future is even more unsaphisticated.
Over-abstraction and oversimplification for the sake of explanation, conclusions that are precise but do not stand up to validation ... Perhaps economics can only exist in thinking.
What do you think?
finish!
I am rubbing everyone, this is my 344th writing, it is a small part of his ordinary and boring life, and it is also a little progress for him.
Welcome to the public account "Knead everyone" to play with me.
Thanks for reading, thanks for liking.