In a recent Reuters opinion column, Mark Thoma faults academic economists for their failure to predict the housing crash. He says their failure can be attributed to the disconnect between academia and economic forecasters. I don’t agree with Thoma, but I do think he gets it right when he says the failure of modern day economics,
Posts tagged with: homo economicus
Courtesy Evangelical Outpost and the always-interesting 33 Things, here’s a video on the strangeness of the economics of incentives and punishments:
The lesson here is that people in real life, body and soul, are not simple rational economic actors who respond only to material realities.
Shankar Vedantam on the problems of “social” governmental intervention, including increased moral hazard (HT: Arts and Letters Daily):
While it seems like common sense to pump money into an economy that is pulling the bedcovers over its head, the problem with most social interventions is that they target not robots and machines but human beings — who regularly respond to interventions in contrarian, paradoxical and unpredictable ways.
Too true. So much for homo economicus. I might also add that the unpredictability, or should I say spontaneity, of human reactions in all kinds of situations is pretty strong evidence for the reality of free choice and against mechanical determinism.
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