Take that, economists!

Brownlee’s mistake was to put into practice something that worked only in theory.

Meet the economists who know why we buy what we buy | Money | The Guardian

Buried in an excellent article introducing the field of behavioural economics to a wider audience is that one line takedown of economics theory! I happen to believe that economists just aren’t scientific enough to understand how modeling works. A well behaved, rational human being who makes every decision independently of other decisions based solely on maximizing her economic utility is like (warning, quantum theory reference) a physicist reading about the particle in a box model and deciding to predict the behavior of all subatomic particles. Yes, it is a neat theory with some neat math, but it’s only the first step!

Scientists try to be a little more humble with their modeling. They seem to know that the chaos and probability driven events in even the simplest of real world settings make models/simulation mostly exercises in trend seeking, not deterministic end points.

To predict the economic behavior of people, you have to include the variables that make them people! Not assume that all people will follow all your assumptions of their behavior strictly, and to not call them names when they don’t act to maximize their short term utility!

Anyway, apropos nothing, I like to rant about economists! The article also notes that Barack Obama is a follower of behavioral economics, good for him. I wonder if McCain even knows what that phrase means.

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