Big Ideas in Social Science: An Interview With Robert J. Shiller on Behavioral Economics
There’s an argument that specialization allows people to progress further in their field and is preferable to knowing a little bit about everything.
.. There are no errors in conventional economics: it’s all rational optimization.
.. While home prices were going up and up it just seemed as if anyone who raised the observation that they might fall wasn’t making an intuitively plausible observation. Until they started falling!
.. The amazing thing is that, in the economics profession of 20 years or so ago, there were no bubbles.
.. ever since Samuelson wrote this a half-century ago, that people want to maximize their consumption. All they want to do is consume goods; they don’t care about anyone else. There’s neither benevolence nor malevolence. All they care about is eating or getting goods and they want to smooth it; they described it in terms of so-called “utility functions through their lifetime,” and that’s it. That is such an elegant, simple model, but it’s too simple.
.. If the economy were to improve, what would your employer do?
A. Nothing — why should he or she help me just because the economy goes up?
B. Well, if the economy were to improve, that would mean the market for my services would improve, so my employer would realize out of self-interest that he or she would have to raise my wage in order to keep me.
C. My employer is a nice person and he would recognize that he or she should share the benefits with employees.
.. I think that if people think that fairness is such an important thing in labor contracts then modeling the world as if it’s of total insignificance is wrong.
.. it doesn’t help to have a theory based on wrong assumptions.