Neoliberal economics assumes a) we’re rational b) consistent c) all knowing of the future (despite Tom Worstall’s denials that this is so – and I explain why in the book) and are therefore, in effect d) automatons.
I simply cannot work out where Ritchie has got this from.
Unless, well, unless he\’s just completely misunderstood some of the buzz words that float around neo-classical economics.
Rational for example. At heart it\’s simply assuming that we try to figure out the best way of getting things done. It\’s a much, much, more restrictive meaning than the general language meaning of \”rational\”.
Consistent preferences? This doesn\’t, at all, mean that we are consistent in our preferences over time. Only that if you prefer A to B and B to C then you prefer A to C.
As to perfect future knowledge that\’s just balderdash.
And remember, these are all just simplifications used in certain models. That\’s all they are: no one at all is trying to state that they are an accurate description of a complex world. Only that as logical constructs they can help illuminate certain specific corners of it.
I’ll go further than that – for anyone who thinks we’re human and not automatons this book offers an explanation of economics almost unknown in mainstream literature,
Well, yes, that\’s rather the point. If you don\’t understand the mainstream literature then you may well come up with something different from it. That doesn\’t mean that what you\’ve come up with is either correct or even useful.
I suppose I\’ll have to wait for that review copy to pitch up to see whether he really has got his descriptions of \”mainstream economics\” so wrong.
‘Tom’ Worstall. He He.
Can’t even get that right.
Of course, those who believe in “Planning” don’t think of people as cogs in a giant machine. Or automatons.
In fairness, the consistency assumption isn’t as reasonable as one might think, as Allais’ paradox showed:
http://en.wikipedia.org/wiki/Allais_paradox
There might be a neurological basis for this:
http://www.investorschronicle.co.uk/2011/11/14/comment/chris-dillow/your-investment-brain-iZk88z2AcJ2cUHP8rpMRvK/article.html
I assume this is what Richard has in mind, surely.
And heaven knows how assuming a) to c) is meant to result in d). I’ve read a number of arguments for determinism, none of them have taken that form.
Chris. What does Allias Paradox show. My natural & entirely rational reaction to what is set out there would be to walk away & keep walking very fast. That’s because experience has shown that whenever one’s offered something for nothing there’s usually a catch & the cost of the catch grows with the size of the supposed benefit.
It’s why Richie bollocks & all the other carefully planned nonsense breaks down when it collides with reality. Peeps are deeply rational when they chose to act irrationally because they not only look forward at rational choices but look backwards at experience.
My own studies of Mr Murphy’s excellent work demonstrate that he is in fact practising Economics as if People and the Planet Mattered ™
He may be right that macroeconomics has been too reliant on modelling agents as being able to know the future, in a sense.
See this excellent short essay by Michael Woodford.
http://ineteconomics.org/blog/inet/michael-woodford-response-john-kay
I think he means it’s based on emotions rather than logic. You and your arithmetic, Tom!
I’d like to know how it would be possible to come up with any mathematical model of agents behaviour, stochastic, bounded rational, whatever, that cannot be accused of modelling people as automatons. Hell, one of the leading candidates to replace what RM calls neoliberal economics is computable agent based modelling, which has all sorts of features I know RM will like the sound of, even of he doesn’t understand, like systems with no equilibrium.
Oh, and the fact that occasions can be found where people don’t act consistently does not tell us that modelling people as acting consistently is the wrong approach.
Do economists ever talk to traffic engineers? They have a similar problem, individual actors who need to be treated in aggregate.
A model make seom simplifying assumptions, but makes them explicit. Having been made explicit they can be examined/challenged/ridiculed.
Far better then to retreat into judgement/wisdom where those assumptions can remain undisclosed and unexamined even to the proponent.
This man really is unbelievable. Presumably he would recognise that Hayek was a ‘neo-liberal’. A neo-liberal whose Nobel address was entitled the ‘Pretence of Knowledge’ – which is a critique of the knowledge assumptions in neo-classical theory – both micro and macro. Murphy is incapable of recognising the difference between neo-classical economics and neo-liberalism. Many so called neo liberals reject the assumptions of neo-classical economics and many neo-classical theorists have been key protagonists of ‘market failure’ theories – this ‘market failure’ view is the orthodoxy in most universities – not ‘neo-liberalism’ or ‘market fundamentalism’. To recognise this though would require actually reading a few books, something that Murphy patently hasn’t done.
Wouldn’t it be just reward if (as it appears there may be) a reference to Uncle Tom Wirstall in the book.
Mark P hits the nail on the head. Hayek pointed out that central planning can’t work precisely because there is no way a person or group of persons can have the data to coordinate the lives of millions.
Murphy is also confusing rationality with omniscience.
But I just don’t get it: even by the depraved standards of today’s left, he is an embarrassment.
Bloody hell. I am furious. The “commentator” that he was taking apart in this post is me. And I can’t reply because he deletes my comments. And I can’t call him out on twitter about this because he has blocked me. And he hasn’t had the decency to respond to my remarks where I made them, which was on his article entitled “The Cowardly State” on the Liberal Conspiracy blog. If ever there was evidence that this man is a two-faced, underhand, slimy creep, this is it.
Here’s the link to Ritchie’s post, by the way. Feel free to take him apart if you feel so inclined.
http://www.taxresearch.org.uk/Blog/2011/11/17/i-believe-in-belief/
Frances Coppola:
To most hangin’ around here, the revelation that RJM’s a “two-faced, slimy, underhanded creep” is really, really, “old news.” But you also have to recognize that the description applies much more widely–to a really significant fraction of all those seeking to influence opinion, especially those we recognize as in leadership positions in politics, education,
the press, entertainment, etc. Deal with it.
Gene
huh, well I wasn’t expecting sympathy. Just hoppin’ mad.
Maybe I’ve just led a sheltered life.