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August 25, 2009



Two more years of this Aussie bashing...

Noooooooooo, it is only just beginning!

Dave Weeden

As you haven't defined "rational behaviour", it's very hard to say what behaviours aren't rational. The assumption seems to be something like "gather all possible information and carefully process it". The problems with this include knowing when all possible information has been gathered (and whether one can decide this using our 'rational' heuristic) and knowing what kind of processing is suitable.

There isn't actually any such thing as "rational behaviour". Self interest? Self interest of our genes? Who is to say which is paramount if either? Rationality is *conditional*.

I think you're wrong about the cricket ball thing. We can actually make pretty good calculations about velocity and trajectory on the fly; the time required is not very much at all. It's true that most cricketers can't do the maths, but they do formal maths and ball catching with different parts of their brains. You probably can't talk cogently about Chomskian grammar either, but you can write grammatically.

Anyway, I think I agree with you - apart from adding to your observation "it's unoriginal and uninteresting" "it's wrong too".


The scientists might argue that this is the why economics is such a poor relation to the pure sciences.

But scientists use rules of thumb and instinct to guide their experimentation and understanding too.

Having said that - as an economist, I come across some mindsets which are just plain wrong, and are 'myths' rather than 'folklore'. In this way, some 'irrationalities' can become accepted orthodoxies, even though they contradict observed behaviour or strong research findings. The world of economics and economic policy is riddled with them...

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That article is refers to the persons who are behave irrationally. That article is worth reading for that kind of people.


"The rule of thumb “choose a busy place - the locals might know something” will often do well; sometimes at least, there is wisdom in crowds."

Not necessarily:


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And a lot of it reflects a switch from bank deposits to securities; foreigners “other investments” in the UK, http://www.watchgy.com/ mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.

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I have a hard time believing in such things as being rational, and sometimes even logical. I think they bring the world to a halt because it makes us dependent on the expected.

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There is a lot of merit to what you're saying. I suppose regulatory measures--in a lot of ways, similar to corrective keynsian measures--also presuppose that the "only" problem with the financial crisis rests with the private sector, or the fact that "irrationality pervades human behavior and information asymmetries are abundant. . . ." My question was meant to also stimulate discussion on whether distortions in the economy's capital structure--which can almost all be attributed to government fiscal and monetary policy--essentially set the foundation upon which this "irrationality" thrived. That is, while I realize there were problems at every level, perhaps by focusing solely on the private sector, we are ignoring the core illness of distorted demand for long-term capital.

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