A Bayesian Detour, 3

The next question relates to how we "formalize" these two pieces of information. How do we think about them as clearly as possible?

Continue reading

Posted in Uncategorized | Comments Off on A Bayesian Detour, 3

A Bayesian Detour, Continued

This is going to build on my previous post about opportunity costs and the margin at which we change our decision, from the choice of "no bet" to the choice of "okay, I'll take a chance on that".

Continue reading

Posted in Uncategorized | Comments Off on A Bayesian Detour, Continued

A Bayesian Detour

This is borrowed from a discussion elsewhere online, but I think it's worth it.

Continue reading

Posted in Uncategorized | Comments Off on A Bayesian Detour

Working Paper Part A

The previous were background. This is now in the (slightly) more academic style.

Continue reading

Posted in Uncategorized | Comments Off on Working Paper Part A

Working Paper Part 3: The Clone Economy

THE CLONE ECONOMY

Continue reading

Posted in Uncategorized | Comments Off on Working Paper Part 3: The Clone Economy

Working Paper Part 2: The Magic Space Alien

The question is: where do prices come from?

Continue reading

Posted in Uncategorized | Comments Off on Working Paper Part 2: The Magic Space Alien

Working Paper, Part 1

This isn't a proper Working Paper. It will be more an attempt to explain what I do, and why I do it.

Continue reading

Posted in Uncategorized | Comments Off on Working Paper, Part 1

Econ for EM 7: *Why* Economics for English Majors?

Our hearts are too small.

They are not capable of the most basic task of elementary addition. We have enough neurons to appreciate the tragedy of a single death, at least if it's presented to us in a compelling narrative format by a skilled storyteller, but not nearly enough neurons to appreciate an event that is, quite literally, fifty million times worse. Or even infinitely worse, if we're comparing a fictional movie to a real world genocide.

Our feelings should be able to multiply. But no. This is how we get an indifferent French official claiming that the loss of so many lives in the Great War doesn't matter, isn't important, isn't something they concern themselves with. Just going with their gut, and the gut doesn't care about statistics. They're going with their feelings, and their feelings can't do the proper math.

People treat some of the largest mass murders in history like nothing more than the bottom line of a financial statement. Just a dry boring number.

I wish, oh how I wish, that we all could feel fifty million times the pain. A physical mass that is orders of magnitude larger and more powerful and more dangerous than our own tiny bodies is something we can intuitively understand, naturally and instinctively. If we could feel the literal magnitude of the catastrophes in front of us, we would react to the problems in front of us with the same instinctive knowledge that we would in the case of an oncoming train. But we do not understand, and cannot understand, the mass of pain from fifty million murderers. Or to be honest about it, even of a bare couple dozen.

If we had an instinctive understanding of the magnitude of the suffering of others, instead of just dry statistics, we would not so often push in the wrong place. There is no novel, no film, no piece of music that can convey to the narrow human heart that the pain of fifty million people is literally fifty million times worse than the pain of one person.

That is exactly why the language of business is so dry and lifeless.

The dry and flat terminology of business is because all of business is just a set of statistics. There's no narrative. No story. The bottom line of the financial statement is the same language as fifty million deaths. It has no affect. It's not the gripping story of one family's struggles with tyranny, not something tiny enough to fit inside our miniature hearts. The language is flat and cold precisely because the topic is so overwhelmingly large and important.

Future chapters of this book will be about dusty old numbers. They will be statistics. This will all be presented in the same dry business speak. I will try to spice up the discussion as much as I am able. I'm a better writer than most economists, and I hope I can make this presentation interesting enough that it captures the attention. I hope I can do this, because the stakes involved are life-and-death.

There is a real oncoming train that I want to talk about, even if the bottom-line style of discussion makes it seem otherwise.

If we want to discuss big important topics that are too big to fit inside our hearts, then we will need to resort to "statistics". We need cold numbers to discuss big ideas. A good story can teach us about the heartache of an unnecessary tragedy. A good story can fit inside our heart and tell us the direction that we need to face. But a story can't tell us about the magnitude of the problems in front of us, because our heart simply can't do the figures.

But we are, at least some of us, rational beings.

We can learn mathematics. We can learn how to add 1 + 1 and get 2. We can use our cold language to study magnitudes and their importance. We can use logic and understand that a bigger tragedy is worse than a smaller tragedy. We can learn more about science so that we don't accidentally cause more unnecessarily deaths with our intellectually dirty hands, or even worse, so that in our pride we don't deny the deaths that we are unintentionally causing.

We can learn mathematics, and even some economics, in order to learn how to push in the right place.

WHY ECONOMICS FOR ENGLISH MAJORS

I'm writing this, because I'm angry.

I'm angry for exactly the same reason that Ignaz Semmelweis was angry when he found an extremely easy way to save the lives of new mothers in his hospital -- simply washing hands thoroughly with a chlorine solution -- and the doctors of his time not only refused to listen, but even got him fired so that they could avoid hearing more of his enraged and fully justified remonstrations remonstrations.

I hope in this book to be somewhat more convincing than poor Ignaz. My anger is the same as his anger -- for quite literally the same reason -- but it would probably be counter-productive to follow his previous strategy. The evidence he left us with is that his strategy does not work. Even with life-and-death stakes, it does not work.

I am angry. I could hurl invective, but it would be pushing in the wrong place.

Obviously this isn't just for "English majors". That's just a short-hand for people who don't have much exposure with my own field of study. This book is an attempt to explain certain aspects of the economic way of thinking. The better aspects, I hope. I want to offer one or two gold nuggets of understanding, even if those nuggets were previously seen to be covered in filth. My wish is that this will be clear and convincing even to people with no previous background in the subject, and whose only previous exposure to economics is blowhards on the internet who offer only poorly written, poorly reasoned, and morally dubious arguments.

I want to offer what economics can be when it's at its very best -- or at least, as good as I can personally manage -- rather than the mindless stuff that we must so often endure.

So. Let's get to it. More obviously economic-sy stuff should begin from here.

Posted in Uncategorized | Comments Off on Econ for EM 7: *Why* Economics for English Majors?

Econ for EM 6: Our Hearts are Too Small

A real hospital is not just dealing with beds. They have doctors, nurses, janitors, heart monitors, drug cabinets (filled with drugs), MRI machines, x-rays, an ER, surgery rooms, a psychiatric ward, an intensive care unit, and all the rest of it. And not an eternal supply of any of it. They have a limited number of doctors, and MRI machines, and IV's. Medical resources don't go on forever.

Continue reading

Posted in Uncategorized | Comments Off on Econ for EM 6: Our Hearts are Too Small

Econ for EM 5: The Opaque Language of Business

The doctors in the Viennese hospital were wanting to save people, or so they told themselves. They were in all probability sincere.

But by accident, they were pushing women onto the train tracks to die rather than pushing people off of those tracks, and when it was correctly pointed out the deaths that were caused out of ignorance, they refused to listen out of pride.

They were pushing in the wrong place. It was pointed out. They refused to listen.

Continue reading

Posted in Uncategorized | Comments Off on Econ for EM 5: The Opaque Language of Business