Monday, November 28, 2011

AKIC Weekend observations and observances including a defense of classical economics

  • My weekend is Monday and Tuesday.  I hope you don't have a problem with that! 
  • I type the previous in a moment of defiance.
  • These moments of defiance, I notice, are so easy to have at home.
  • I have tried to make edited videos again.  Watch here and here.
  • Those of you who live in the Hui Shan Economic Development Zone or Yanqiao may be keen to know that the 25 bus route has changed again.  A part of a part of the route that had been closed off for subway construction has re-opened, and the route now goes downtown a little bit quicker.  No more does the 25 go along part of the 610 route.
  • By the way, if you are a laowai living in the Hui Shan or Yanqiao area, you are welcome to send me an email.  We can share some of my Crown Royal or just have a chit-chat.  Email me at
  • Train!
  • Photos taken on our trainspotting trip.
  • The study of Economics has been taking some hits lately.  For example, this article which states that Economics should construct its theories on the basis of evolutionary biology.  Classical Economic Theory, the article insists, has been discredited because it couldn't predict the Economic Meltdown of 2008. Classical Economics also needs to fix itself of the rational behavior assumptions used in its models -- this is what I get from the article.   And if this is what the article's author is stating,  I would say it is weak stuff. 
  • Evolutionary biology, as far as I can understand, hasn't been able to make predictions either.  The life that evolutionary biology has had as a field of study, simply hasn't been long enough, if my assumptions about it are true, to have been able to make predictions.  The changes it says happen and will happen take place over many lifetimes -- no evolutionary biologist could see his predictions come to fruition or to naught.  Economics, similarly, can't predict with complete certainty what will happen in the future.  I recall reading somewhere that Milton Friedman said that he didn't make predictions because the mere fact of his predicting something would cause people to react in a way that was both unpredictable and negating of his prediction.  Any economist that would try to make predictions, with complete authority, is making a logical error.  For example, let's say that an economist tries to predict which businesses will fail and which won't.  If every business heeded the economist's predictions, would this mean that there would be no unprofitable businesses?.  Of course not!  One can take a guess, and there is a good chance that the economist is right but there is also a chance that he will be wrong.  Economics is not deterministic and it is logically impossible that it could be. 
  • This talk of Classical Economics changing its rational behavior assumptions is also a dead end.  The classical models are built on the fact that people are subjective in their economic-decision making, not rational.  And what is rational or irrational is a subjective matter.  People who complain of this rationality assumption, don't seem to notice this -- at least that is what I have seen. 
  • Hope for somewhat more realistic model of economic behavior has been invested its hopes in Behavioral Economics.  I just recently listened to an advocate trying to defend Behavioral Economics lack of simplifying assumptions, what he called its many theories or complexity, by comparing B.E. to an the operation of one's eyes.  Our eyes are very complex things.  Our eyes are good.  Therefore, B.E. is good because it is complex.  This is a charlatanistic or pseudo-scientific argument.  What first sprung to my mind, when I heard the B.E. advocate say that, was how Freudists had to resort to more complex theorizing to explain away what wasn't consistent with their theories.  The other point I make about the argument about eyes is this:  they can't see everything.  We can use our eyes to look at elephants.   A lot of theory, built up through observation about how Elephants exist and operate is correct.  And yet we can't predict with absolute certainty what any elephant will do in the next minute.  B.E., is trying too hard, to do something with economics that just can't be done.
  • Try as they might, Classical Economics is the best tool out there to analyze Economics, because it isn't deterministic and its assumptions are built not on rational behavior, but subjectivity.  This is unfortunately not understood by so many.   
  • My son Tony climbs and slides.
  • Tony on a bridge.
  • Photos I took on the bridge that were not of Tony.

No comments: