Federal Income Tax - ???!!!jflakdjfloiuw!lakdjk!!!!!???

On Liberatarian Paternalism 2 - Response to Trisco

Here are my comments on Trisco's "On Libertarian Paternalism" , which were too long to fit in the comments box. It just meant to be casual musings in reply to Trisco's question about economists and is in no way meant to be a serious post.

Nice reaction, Trisco! Good point about the apparent contradiction. I'll like to know more as well.

My thoughts on economists being closer to politicians than scientists: Could economists be “scientists" (I had to put quotes, sorry), who are biased to the extreme? It’s no secret in academia that *most* scientists aren't really interested in the nature of reality...if the nature observed is not the nature they *set out* to observe. i.e., a result is probably not worth pursuing in full glory if it doesn't agree with what they wanted to observe. Perhaps you will agree that this is more significant in industry research, but I digress. What is interesting is what happens when the effect observed is the effect proposed. Then even scientists in the fundamental sciences are extremely prone to *advocate* and *advertise* the effect - "e.g., trapped photons must behave similar to trapped electrons, so let us look for the effect there". Well, economists are scientists with extremely real-world problems with real world implications, and unfortunately, with their only true laboratory being the real world. Therefore, I imagine the tendency to advocate and push their models on the real world (hoping their proposed effect would happen) is amplified much more than in scientists in fundamental sciences: a. that’s the only way they can test it, and b. their theory might just save the world. Note that most scientists, regardless of how what they propose in their grants, understand the evolutionary, as opposed to the revolutionary, nature of their research; perhaps this is not so true in economics, thereby moving them closer to politicians?

Disclaimer: This is a very general statement trying to explain overall trends in behavior among scientists in different fields. So it is served with a grain of salt, please take it as such.

On Libertarian Paternalism

I'd like you to do me a favor. Read the following article by Richard Thaler, one of the authors of Nudge. It is a response to an academic colleague, Professor Whitman and Rizzo. The article is labeled a Reaction Essay, presumable because its a response to Whitman and Rizzo, but I had quite a reaction to it myself. Since Behavioral finance is part psychology, I almost wonder if he is referring to the reaction in readers. I'd like to hear about others reactions to this article. I've given mine below, but make sure to read the article before being contaminated by mine.

My Reaction
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I have to say, the ratio of insults to rational arguments is quite high here. This supposed reply might make Thaler feel better, but its not going to convince anyone who doesn’t agree with him. I don’t know what the rest of this discussion between thaler and whitman looks like, but this is certainly not the dispassionate rational discourse one would hope for between academics. Like the referee who seems to only see the retaliation, I might be laying blame on one side, when it belongs on both. Indeed, coming from a hard sciences background, I find it a bit disturbing. Thaler sounds more like a politician than a scientist…. Come to think of it, many noted economists sound more like politicians then scientists. I wonder why that is? (for some reason when I read this question it sounds rhetorical, but I mean it. Why do famous economists seem to view themselves, and behave more like politicians, than like scientists trying to explain the economic world?)

In fact his main claim, that “we call a policy paternalistic “if it tries to influence choices in a way that makes choosers better off, as judged by themselves.” (The emphasis is in the original.) ” is not only completely unsupported, but directly contradicted in his discussion of health care where he says there is no other choice, but for the choice architect to choose what SHE thinks is best for everyone. This is not surprising as its hard to imagine how a central authority/choice architect would be able to solve two apparently unsolvable problems and both read the minds of each individual and then nudge each individual in the direction they themselves would like to go.

I'd also like to point out that this definition is in contradiction to what I think most people would regard as the definition of good parenting. A parent make decisions that they think are best for their child, because the child does not know enough to make their own decisions yet. Later say in teenage years, a parent might guide instead of decide, but they guide towards what experience has taught them their kids will wish they had wanted ten years from now, not what they actually want now. (Hmm you know you'll meet just as many girls at college as you will on tour with your garage band...) I think why I and others react so strongly to the idea of libertarian paternalism, is that it implies that yet never comes. We are never really able to make our own decisions and we need help from our betters. How are those betters defined... Who get to do the nudging...

I find it hard to imagine how Thaler could so blatantly ignore what is supposedly the central point of the article. This is why I'm curious if I'm reading through colored glasses. Did I miss some support for this definition? If so, or if not, can someone even explain how it is possible to nudge each person to what they themselves want without a) mind reading and b) the number of necessary nudges being proportional to the number or people?

Dr. Trisco :P

By the way I came across the above article through the fabulous Simoleon Sense. A great content aggregater for behavioral finance and investing that links and previews more great articles and videos then one could possible read. Though somehow, I suppose Miguel, the man behind the site actually does.

The power of words : The Hamilton Rap

Speaking as someone struggling in the deep dark dunes of Dissertation District (sorry but couldn't help the alliteration - been starved for some creative release since thesis writing is anything but) , I have been newly reminded of the power of words. This has been in the back of my mind for this entire DAY (in caps to indicate that I have lost all sense of time ...Dissertation District is dispairing oblivious to the diurnal doings of our precious planet - no apologies this time: you seem to know what you have gotten yourself into - but the past "earth month" has shrunk into the "Dissertation Day "). Now see, thesis writing would be so much more fun, if I can entertain random distractions in thought like in a blog (wanna go ride bikes? Gah, don't listen to me - I am all jacked up on mountain dew [ref: Talledega Nights: The Ballad of Ricky Bobby, Journal: Hollywood, Year: 2006]. Woo Hoo.

Back to what I was actually blogging about - the power of words. A picture's worth thousand words, I am told. Being the 21st century (hopefully it still is or Dessertation Day has been temporally dilating faster than my simulations) lets up the game and post a video on the amazing power of words. Check it. Be Blown Away.



ps: Thanks to Guy Tal for passing this along !
pps: You know you are truly out of touch with your life when you take a minute to remember your own (blog) pen name. Ouch. Can't wait to get back to reality.

Keynes Vs Hayek: Fear the Boom and Bust

I will try to fill in this post with a short explanation of the Austrian business cycle theory as some point. For now just enjoy this sweet rap video that explains it all better then I could anyway :P




PS: Here is a link to the people that made the video. Their cite contains some good background on these two economic giants including pod casts.