its hour come round at last

by Henry on September 17, 2007

Those interested in John’s post below should also take a look at Cosma Shalizi’s long awaited, long heralded, post on econophysics, which went up yesterday. Following quickly on the heels of part IV of dsquared’s Freakonomics review, this is surely a sign that End Times are upon us (biblical authorities seem to disagree on what the Third Sign is going to be; I leave plausible speculations thereon as an exercise for the reader).

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Rationality Revisited | Cosmic Variance
09.17.07 at 4:45 pm

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1

cosma 09.17.07 at 3:02 pm

The Council of Freiburg decisively decreed that the third sign will be the publication of the second part of Being and Time.

2

Hidari 09.17.07 at 3:18 pm

‘To begin with, mainstream economics is clearly false. I don’t say this just because perfectly competitive markets aren’t the only economic institution in this world; the neo-classical framework now includes very sophisticated theories of imperfect competition, imperfect information and non-market institutions, and these developments are mainstream enough to result in Nobel Prizes (in, e.g., 1993, 1994 and 2001). The foundation on which the neo-classical framework is raised, though, is an idea about rational agents: rationality means maximizing expected utility, where expectations come from maintaining a coherent subjective probability distribution, updated through Bayes’s rule; moreover, the utility function is strictly self-regarding. This is a very well-specified idea, readily formalized in clean and elegant mathematics. Moreover, there’s pretty much only one way to formalize it, which makes the mathematical modeler’s life much easier. All of this appeals to certain temperaments, mine very much included. Alas, experimental psychology, and still more experimental economics, amply demonstrate that empirically it’s just wrong. We are boundedly rational, and, for good or for ill, we give a damn about others. Moreover, there are very general reasons, having to do with the computational intractability of optimization problems, and the severe limitations of computationally feasible Bayesian learners, to think that no creature could ever be a “rational agent” in the neo-classical sense. Bounded rationality is the only kind we encounter, and the only kind we are going to encounter. (Yes, yes, there are selectionist arguments a la Friedman or Alchain: they fail. But this post is supposed to say mean things about physicists, not the Chicago School, so another time. Also, I’d say it’s an abuse of the language to describe our deviations from the impossible neo-classical ideal as “failures of rationality”, but, again, another time.) But, as I said, all the rest of the neo-classical framework rests on this conception of individual decision-making; remove it and all the models are standing on air. So: neo-classical economics is false.’

YES!!! OH GOD YES!!! (more simulations of orgasm etc.).

3

Another Duncan 09.17.07 at 3:47 pm

The 3rd sign:
Publication of “The Art of Computer Programming Vol 4” by Donald K Knuth

followed by the 4th sign:
The gold master of Duke Nukem Forever.

4

Another Duncan 09.17.07 at 3:52 pm

Actually a quick search of Amazon has shown that the 3rd sign has come to pass. Truly the end times.

5

mds 09.17.07 at 4:52 pm

Oh, fooch, another duncan, you stole my quip.

Perhaps I can still salvage this comment by making a sly connection to a later CT post:

Hey, is the title of this post an allusion to Season 4 of Angel?

6

wolfgang 09.17.07 at 7:55 pm

> So: neo-classical economics is false.
but just a few sentences later on he states that neo-classical economics may still be a good approximation in many cases.

7

notsneaky 09.17.07 at 8:01 pm

hidari:

“Well, classical physics is false, too: the combination of Newton’s laws of motion with Maxwell’s equations for electromagnetism straightforwardly predicts that ordinary atomic matter, composed as it is of moving charged particles, should be unstable. The theory predicts that every material body should rapidly collapse in an ultraviolet flash; manifestly, the theory is false. [2] Nonetheless, physicists know very well that classical physics is an extremely good theory in the right limits, and that a lot of the situations of practical or intellectual interest in the world are in those limits. In a similar way, I think, the neo-classical ideal is a tolerable approximation in certain limits”

not to mention the fact that if you’re gonna give neo-classical theory “very sophisticated theories of imperfect competition, imperfect information and non-market institutions” then you should probably give it behavioral economics as well.

8

John Quiggin 09.17.07 at 10:32 pm

Cosma’s piece was well worth the wait.

I’m not sure how I missed DD Part IV. I had a more charitable view mainly because I started from the premise that all the stuff about incentives was just a polite gesture to Levitt’s fellow-economists. As was said in another thread, all that is really needed here is the notion that people act purposefully.

9

terence 09.18.07 at 1:10 am

Surely the third sign is the release of the forthcoming Guns’n’Roses album?

10

goatchowder 09.19.07 at 1:59 am

Or the reunion of the Sex Pistols:

http://www.nme.com/news/sex-pistols/31171

11

e julius drivingstorm 09.19.07 at 6:54 am

Forgive me for not having read the links, but is this supposed to be the third sign of seven in the book of Revelations?

There is a word for a user of big words: sesquipedalionist.

Is there a word for using small words, or small sentences, or sound bytes to explain big thoughts?

Or are we to build a wall around knowledge?

If I may be somewhat whimsical.

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