Prometheus 6: What started me looking at economics in the first place

August 26, 2003

What started me looking at economics in the first place

Still having those economics discussions.

I keep diverging from economic theory and focusing on what actually happens though. That's because my interest in economics was sparked by the absurdity of someone winning a Nobel Prize for the mundane notion that humans don't necessarily follow economic theory.

Daniel Kahneman has integrated insights from psychology into economics, thereby laying the foundation for a new field of research. Kahneman’s main findings concern decision-making under uncertainty, where he has demonstrated how human decisions may systematically depart from those predicted by standard economic theory. Together with Amos Tversky (deceased in 1996), he has formulated prospect theory as an alternative, that better accounts for observed behavior. Kahneman has also discovered how human judgment may take heuristic shortcuts that systematically depart from basic principles of probability. His work has inspired a new generation of researchers in economics and finance to enrich economic theory using insights from cognitive psychology into intrinsic human motivation.

This is too new to have filtered down in any detail such that it would affect the discussions on BlogNet. Still, you'd think that obvious…

Posted by P6 at August 26, 2003 11:39 AM | Trackback URL: http://www.prometheus6.org/mt/mt-tb.cgi/1444

Comments

what is this post about? IOW where do I get to annoy economists with what I know about Kahneman and Tversky?

Posted by at August 26, 2003 05:45 PM

I've been in a couple of long threads on Crooked Timber. That's the link. Since they only keep like three days on the front page it's not likely to last much longer.

It started with the blackout and headed inevitably to the argument that deregulating electrical generation and transmission would be the key to solving the problem. Prices reflect true costs, inspiring consumers to use electricity more efficiently and corporations to behave more efficiently yaddayadda.

I'm pretty sure the participants as as much economists as I am, which is to say we're all arguing from popularizations of the subject.

Posted by at August 26, 2003 05:52 PM

Humans are too irrational for economic theory to be an accurate predictor all the time.

Posted by at August 26, 2003 10:11 PM

I actually disagree, Al-M. Statistically, humans are pretty predictable units.

The problem as I see it is there are people who know the rules and (most) people who don't. This skews things incredibly.

Posted by at August 27, 2003 02:59 AM

It's time to remember that MIT has Open Course Ware. Which means that if you really are interested in learning something online, you have every opportunity to do so. Ever since I got bored out of my mind at university,...
Read more in OCW »

Cobb Aug 27, 2003 1:52 PM