Economics, Shmeconomics (was RE: IP Protection ...)

[Clay Shirky]

> People by and large tend to act rationally.  However we don't know
> the real limits of this rationality, and we don't know in what
> contexts the "by and large" part allows us to predict behavior of an
> individual or of a market.

You graciously offered me the last word, but now I don't know that I
need it, since you've become so reasonable that I can hardly detect a
trace of your earlier "Economics doesn't know its limits/economists
are trying to run the world" positions from your earlier posts.

Reading your analysis of the opposition to the behavioral work of
Thaler et al, your position now seems to me to be:

1. Economists correctly understand that people by and large tend to
   act rationally.

2. However, this principle, when overapplied, can lead to demonstrably
   false conclusions when compared with field data.

3. A group of economists, now loosely titled behaviorists, is trying
   to provide a coherent framework for understanding that 'ocean of
   anomolies'[1]. 

4. That group is presently in the minority.

If I have understood your position correctly, I have to say that I
think all of those things are true, but that they constitute a
critique of science, not of economics nor of economists in particular.

If you know Popper you must also know Kuhn and "The Structure of
Scientific Revolutions." As Kuhn pointed out, old idea are replaced
with new ones not when new evidence is presented, but when the last of
the holders of the old ideas dies. Contrary to popular opinion,
scientists tend to change their mind about big framing ideas
relatively infrequently. (Samuelson put this in a specifically
economic context when he said "We make theoretical progress one
academic funeral at a time.")

Therefore, the truths you have recently articulated about economics --
that the holders of the older, more simplified theory are slow to
grasp the challenge of the new evidence, that only a subset of
theorists and experimentalists are working directly with material that
challenges the status quo, and that people who owe their livelihoods
and reputations to the older verion of the theory have not given the
young turks the keys to the kingdom, while true, is more a commentary
on human nature than anything wrong with economics or economists per
se.

-clay

1. Paul Feyerabend's felicitous phrase, from "Against Method."