Once more into the flaws with introductory economics

[ShakeZula06]

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Economic Man
Rational


Reged: 01/17/07
Posts: 1

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Quickest custom title ever?

[valtaherra]

I think this point was raised over fifty years ago, and I think another fifty before that as well. I hope this professor doesn't actually believe he has stumbled onto something.

Milton Friedman, for instance, addressing "economic man" in 1953:

"A theory or its “assumptions” cannot possibly be thoroughly “realistic” in the immediate descriptive sense so often assigned to this term. A completely “realistic” theory of the wheat market would have to include not only the conditions directly underlying the supply and demand for wheat but also the kind of coins or credit instruments used to make exchanges; the personal characteristics of wheat-traders such as the colour of each trader's hair and eyes, his antecedents and education, the number Of members of his family, their characteristics, antecedents, and education, etc.; the kind of soil on which the wheat was grown, its physical and chemical characteristics, the weather prevailing during the growing season; the personal characteristics of the farmers growing the wheat and of the consumers who will ultimately use it; and so on indefinitely. Any attempt to move very far in achieving this kind of “realism” is certain to render a theory utterly useless.

Of course, the notion of a completely realistic theory is in part a straw man. No critic of a theory would accept this logical extreme as his objective; he would say that the “assumptions” of the theory being criticised were “too” unrealistic and that his objective was a set of assumptions that were “more” realistic though still not completely and slavishly so. But so long as the test of “realism” is the directly perceived descriptive accuracy of the “assumptions” — for example, the observation that “businessmen do not appear to be either as avaricious or as dynamic or as logical as marginal theory portrays them” or that ”it would be utterly impractical under present conditions for the manager of a multi-process plant to attempt . . . to work out and equate marginal costs and marginal revenues for each productive factor” — there is no basis for making such a distinction, that is, for stopping short of the straw man depicted in the preceding paragraph. What is the criterion by which to judge whether a particular departure from realism is or is not acceptable? Why is it more “unrealistic” in analysing business behaviour to neglect the magnitude of businessmen's costs than the colour of their eyes? The obvious answer is because the first makes more difference to business behaviour than the second; but there is no way of knowing that this is so simply by observing that businessmen do have costs of different magnitudes and eyes of different colour. Clearly it can only be known by comparing the effect on the discrepancy between actual and predicted behaviour of taking the one factor or the other into account. Eve the most extreme proponents of realistic assumptions are thus necessarily driven to reject their own criterion and to accept the test by prediction when they classify alternative assumptions as more or less realistic."



Then there is Ludwig Von Mises, who Milton Friedman quite obviously never read, who in the first half of the 20th century utterly destroyed any notion of economic man and reconstructed economics, and the nature of its true subject, individual action, into its proper fit of praxeological, deductive analysis. But I think most of you know about that [img]/images/graemlins/wink.gif[/img]

[natedogg]

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It may have been better if he worded that "if he sells you something that you don't benefit from having, or gets you to buy more than you will benefit from".

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Still no good. Who determines what is "benefit"? I may benefit from a 4th flat panel tv in my house while the wise philosopher king may self-righteously judge that the free market has tricked me into buying something I "won't benefit from having".

No... the entire premise of the quote in the OP is flawed because it assumes that a wiser, more knowledgeable party can better determine your "needs".

Wrong.

natedogg

[Nielsio]

lol. But the Holy concept of the State/Common Good however does exist right?

[Al68]

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But Biology isn't trying to derive how human interactions are going to occur/are occuring from that reference, nor are they giving out policy suggestions based upon it, for one thing.

For another, the overly simplisitc economics man postulate has been a siren song, leading us away from coming up with something better for modeling.

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The purpose of my analogy was to point out that no one believes "Economic Man" is a real person. Just a simplistic model that does not represent all people.