1902. AdamSelene - May 23, 1998 - 7:13 AM PDT
Slackie,

Since I give you enough grief when we disagree, I should at least give you credit for when you're right. (*grin*) Message #1895 is a precise statement of Elliot's premise and the reality he is ignoring.

The only thing I would add (a slight reprise) is that the ethical case was derived from the pragmatics over time. Introspection and observence led our culture to value hard work - the "work ethic." Elliot's blank-slate definition of "merit" did not arise out of nowhere. Unfortunately, our (American) culture is apparently morphing into one which tends to paint hard-workers as power-hungry-money-grabbers, or to disconnect the behavior from the results and assume that anyone who succeeds in life must have done it at the expense of others. Hopefully, this subculture remains sub.

1903. Msivorytower - May 23, 1998 - 7:31 AM PDT
There are so many services, areas of work, types of jobs where one cannot allocate the precise output of each worker that to say people should always get rewarded by their performance is, well, naive.

One of the reasons Slacks profit maximizing example makes sense is that it already occurs to some extent, in many firms.

And I believe Elliot at one point said that no work takes place that doesn't build, in large part, on a collective effort. Because firms cannot allocate the true output across each worker (a classic problem of imperfect information), they have to take averages, or aggregate output given all workers input up to a specific point in time.

Even when they can identify a specific output with an individual (or division, or group), there is still no guarantee that others didn't play an important part in that individual's ability to produce that output. Marketing divisions are notorious examples of this problem.

So, clearly, there is both the rationale, and the ethical basis for determining salaries (pay) on both effort and performance criteria, and the firm that chooses one or the other exclusively is likely to be less profit maximizing than one that uses both.

1904. FreeToChoose - May 23, 1998 - 7:33 AM PDT
Stumbo's response in Message #1894 " Depends on what you consider "really important." " to CalGal's point in Message #1841 " If it's really important, I'm always for letting the government solve it than market forces."

was an interesting observation, and helped me focus on the issue.

CalGal, why is "important" the critical touchstone? I think art is important, but that doesn't mean I think the government is needed to help people decide what art they like. I see nothing wrong with letting people make their own decisions.
I suggest that a better criterion is deciding whether the market can deliver adequately (not perfectly) *and* whether it is certain that the government can do a *better* job. (Uncertain defaults to market).

For example, I think the market delivery of national defense is very difficult to imagine (though not impossible), and that the government can deliver national defense. However, I think that people can adequately decide what they like in art (Velvet Elvis notwithstanding) and I see no evidence that the government does a better job of selecting deserving artists.

1905. Msivorytower - May 23, 1998 - 7:35 AM PDT
Btw, my problem with FTC's original comment about team pay had to do with issues that Calgal raised; that is, are we talking about extra pay beyond some base or are we talking about how all pay should be set?

If everyone receives some base pay, then allocating that extra pay equally to all team members would be problematic to me, as a team member, that is. It promotes some degree of shirking, and eliminates the incentive that drives others to compete for that extra reward.

1906. FreeToChoose - May 23, 1998 - 7:35 AM PDT
Stumbo

Your argument that effort is probably genetic based is intriguing. Puts a rather large dent in the assertion that rewards should be effort based, if one rejects the notion that results are more important.

1907. FreeToChoose - May 23, 1998 - 7:37 AM PDT
Msivorytower

Sorry. It never, never, ever, occurred to me that someone would allocate a bonus equally.

::shudder::

1908. Msivorytower - May 23, 1998 - 7:43 AM PDT
The argument that effort is genetic makes NO sense. How can *effort* be genetic? Effort is motivation, where is the gene for that?

Everyone operates on a continuum wrt effort. Everyone has a price at which they are willing to work longer, harder, etc, however, the price point that brings forth more effort may be different for lots of people. Some people can be had cheaply, that is, it only takes a little to get them to work hard, others value their other activities more, and are less willing to *give them up* in exchange for money (or even power).

It's called the labor/leisure trade off. Classic stuff. Just substitute effort for leisure, and the same model applies.

1909. FreeToChoose - May 23, 1998 - 7:49 AM PDT
Msivorytower

Effort is roughly as genetic as results.

1910. Msivorytower - May 23, 1998 - 7:53 AM PDT
FTC

Huh? Doesn't compute. Please explain what you mean. For that matter, I'd be interested in how Stumbo could define *effort* as genetic.

1911. FreeToChoose - May 23, 1998 - 7:55 AM PDT
MsIT

Don't take this too seriously. There's an element of truth, but it's mostly a playful attempt to show the intellectual vacuity of Elliot's position. Speaking for myself, of course, I'll let Stumbo weigh in with his own take.

1912. Msivorytower - May 23, 1998 - 7:58 AM PDT
FTC

But his position is not vacuous. It's excessive, but he also makes some valid points. Most work is jointly produced, and to ignore that is to deny that some people work behind the scenes, that is, their output is not easily identified, and yet is necessary to the whole.

1913. Msivorytower - May 23, 1998 - 8:04 AM PDT
BTW on the issue of effort

I can easily see how an argument can be made that ability and effort move in tandem, and that those enticed to work harder are often those for whom the *costs* are lower, that is, they work more efficiently anyway, so it takes less time for them to produce more than someone else.

However, we all know people for whom this *does not* apply, that is, higher ability does not necessarily mean they are willing to work harder, sometimes it's precisely the opposite.

1914. BrerLou - May 23, 1998 - 4:07 PM PDT
MSiT: Please don't burst the bubble of my illusion that they are people out there, like the legendary Type A personalities, who are genetically predisposed to greater effort than myself. What about those compulsive workaholics who throw their marriages in the trash can in order to maintain 16 hour work days aren't they born that way? Verily I say unto you, they have their rewards. On a quibble I would say their efforts are personality driven, not purely genetic.

Nevertheless, I see nothing wrong with extra rewards, for extra *productive* effort, if such can be determined. Indeed, I think it's not only fair but honest to reward an employee for greater ouput, given the same working conditions.

Whether, output can be equated with effort I think is an unimportant quibble. It's not so much a question of fairness but of honesty. An employer should expect to pay for extra work received, thats all.

1915. Slackjaw - May 23, 1998 - 4:33 PM PDT
if you presume that everyone is honest, then yes, it's a quibble.

1916. jbaird - May 23, 1998 - 7:33 PM PDT
A lurker breaks his silence to issue the following plaintive cry...

Where, oh where is wexxford? His daily updates are the only thing worth reading on this collection of buffoons. Oh, well. At least we don't have to read that pompous old windbag Psuedo for a while.

Wexxford, if you're out there, I crave your wisdom:

Bang or whimper? Will the bubble be popped, or will the redistribution from the productive classes (read workers) to the parasites (read investors) continue unabated?

1917. Msivorytower - May 23, 1998 - 8:36 PM PDT
BWAHAHAHAHAHAHA

1918. Stumbo - May 23, 1998 - 11:42 PM PDT
I didn't claim that "effort is probably genetic-based" -- I said that the extent to which one enjoys making efforts is based on genes *and/or* upbringing. That the latter plays a role is obvious; the former, I tossed in because I can't prove that it doesn't.

(But, yes, of course, my argument is merely a reductio ad absurdum of Elliot's silly position.)

1919. BrerLou - May 25, 1998 - 5:56 AM PDT
The point I was making is that we see should see employee effort as an input, no less than say the 50,000 capacitors a producer might purchase.

If 90% of the capacitors are ruined by improper storage, the producer still has to pay for them, regardless of his output from that shipment. Similarly, where it can be determined that one employee has put in, say, 50% more effort than the other members of the team the employer is ethically liable to reward that individual for his extra work, especially if the task demanded it, whether or not the output was proportionate to the output. Now that is from a purely ethical/legal viewpoint.

1920. BrerLou - May 25, 1998 - 6:04 AM PDT
What this would do to morale, or the worker's effectiveness as a team member is another matter entirely, which is why some project managers prefer to go with the team consensus.

On the question of genetics, that genetics makes it easier or harder for some people to put in greater effort is I think beyond dispute.If it's true for baling hay, it must also be true for pounding out a report. Personally I think laziness is an outdated expression used by the lazy minded.) To say,or imply, as MSiT does that effort is pure motivation is simplistic. A part of motivation derives from one's genetic endowments. Genetics is a sub-set of motivation, to use the term in its fullest sense.

1921. BrerLou - May 25, 1998 - 6:09 AM PDT

Entitia non sunt multiplicada praeter necesitatem ... Pluralities should not be introduced, unnecessarily. (Occam's razor ...P.E.'s favorite reference, with good reason.) The edge of the razor turns on the term necessity. So, we can reduce laziness, to motivation or de-motivation. Then, we can reduce motivation to a host of factors, including the promptings of one's genetic endowments, or even diet if you will. How far we carry on the dissection is determined by necessity
.
Of course all that is irrelevant to the question of rewards, since job enjoyment, or not, is not usually a part of the contract. (Hygiene factors are different concern. ) Whether or not the John gives the prostitute the time of her life, he is still required to pay her fee, I'm told :-). Similarly for the employer.

1922. Msivorytower - May 25, 1998 - 6:51 AM PDT
BreLou

"To say,or imply, as MSiT does that effort is pure motivation is simplistic."

Well, then, you need to define what YOU mean by effort, eh?

And I am never simplistic.

1923. CalGal - May 25, 1998 - 10:13 AM PDT
"Similarly, where it can be determined that one employee has put in, say, 50% more effort than the other members of the team the employer is ethically liable to reward that individual for his extra work, especially if the task demanded it, whether or not the output was proportionate to the output. Now that is from a purely ethical/legal viewpoint."

Oh, now. I'd just gotten over being nauseated by the last time this was brought up and you're doing it again?

Insanity. Anarchy. Who cares how hard they try?

Pay salaries and bonuses according to results. What's with this "trying" shit? It's like those damn participation medals they give kids these days.

1924. arkymalarky - May 25, 1998 - 10:38 AM PDT
Hey, what's wrong with those? If it weren't for participation medals, I wouldn't have any!:-)

1925. CalGal - May 25, 1998 - 10:59 AM PDT
Arky,

Well. So long as it only cost me a *little* money (the cost of salaries for the effortmaking unproductives or the cost of those participation medals) fine. I'm sure Slackjaw or someone will describe why it is that those costs are actually a good thing provided they don't get out of hand.

It's when you want the award money for first place just because you participated. That's where I draw the line!

1926. BrerLou - May 25, 1998 - 5:10 PM PDT
My genetics is a subset of my motivation, pure and simple.

This is all that is left of my last post which got lost in The Fray somewhere. I hope it doesn't turn up as a double post.

MSiT:
Effort can be measured both quantitatively and qualitatively. Work contracts traditionally have been based on the quantitative aspect, time or output, whilst job assessment and promotions or firing have been based on the quantitative aspect.

Neither the unions nor contract law would tend to support employers who seek to base pay on post-hiring qualitative assessment of individual output.

MSiT:
"The argument that effort is genetic makes NO sense. How can *effort* be genetic? Effort is motivation, where is the gene for that?

Of course you are not simplistic. Your use of the word motivation is a little facile here, that's all. Occam's Razor permits us to break it down a little more. Motivation includes both internal and external factors. Included in the internal factors are my INTP profile, (whatever that means,CalGal), and my life experiences preserved in my mind. The external factors would include my company's total management of my human resource.

Now when I signed on to Hotmail just now there was mention of a researcher who thinks he has found a gene for thrill seeking tendencies. The body is a chemical factory and the blue prints are coded in our genes. Now every child of the sixties knows that chemicals can motivate a person to do anything. This is the link between genes and effort. Effort=motivation=internal factors + external factors. Internal factors=genetic disposition + experiences

1927. BrerLou - May 25, 1998 - 5:14 PM PDT
Blast, that should have been:

"whilst job assessment and promotions or firing have been based on the *qualitative* aspect."

1928. Msivorytower - May 25, 1998 - 5:22 PM PDT
Brerlou

No, my use of the term motivation was not fascile. Motivation is the incentive for people to offer their labor, and once their labor, increasing amounts of effort (or decreasing, depending on their tradeoffs). In economic terms, the only interesting thing is what are the price thresholds where lots of people begin offering up lots of labor and effort. While each person is somewhat unique in their taste for leisure over labor (or vice versa) we can observe average effects of pay or wage scales on the number of hours people are willing to offer to employers, and its impact on workers motivation to work hard.

The notion of a gene for effort is not very interesting to me, and is unnecessary to understand the labor economics involved anyway. Unless, that is, it somehow reduces the costs some workers face in offering up their labor, making it easier for them to work at a lower price point than for others.

1929. CalGal - May 25, 1998 - 6:41 PM PDT
Brer,

It's MB profile. INTP is one of the 16 possible. What's yours, anyway? (g)

Interesting argument.

1930. ptboya - May 25, 1998 - 7:11 PM PDT
I have real trouble with both sides of this argument...the pay for effort vs. the pay for results dispute. Measuring either is where I can't wrap my brain around this.
Results may be easy to measure when any two people are doing identical work. But how do we make comparative measurements between say, the man who walks on the moon and the woman who checks the integrity of the fuel lines for the booster rockets? Teamwork generally involves people working together toward a common goal who however, don't share common skills.
And in the example used above, how do we make comparative measurements of effort applied? Is it simply hours expended or do we watch each worker every minute and do random checks? I've worked with people who put in more hours than I, but who spend a lot of them socializing.
Slackjaw at least tried to deal with this problem (measuring); everyone else either assumes it's simple, or perhaps has just not addressed it yet.

1931. CalGal - May 25, 1998 - 7:19 PM PDT
PT,

I imagine that the (and it always makes me nervous to use this word) markets take care of the going rates. Then the variance within the going rate is due to results.

So a guy who is an astronaut gets paid more because it's harder to find him than a woman to do the integrity checks.

Neither of these jobs are particularly apt for discussing the next part, which is variance within the going rate.

Take managers. Manager A gets paid more than Manager B because he's more effective. Please keep in mind that sometimes being more effective includes persuading *his* manager that he's doing a good job, even if he isn't. "Results" is a big word.

If you unionized managers and paid them all the same or by seniority....well. That'd be a lousy world as far as I'm concerned. But I think you'd find that most managers would go find a job where they were rewarded for results.

1932. AdamSelene - May 27, 1998 - 8:04 PM PDT
What's the big deal? You pay them whatever it takes to keep them doing the job well - assuming you want the completed job, at a given level of quality at a given duration of time, less than you want the money you have to pay them. If not, pay less and the problem solves itself.

And - of course you have to factor in teamwork, statistical success rates which require secondary (conditioned0 reinforcement, etc. But that's just details. Important thing: pay what the results are worth. Short-term-biased statistical results, of course.

1933. BrerLou - May 27, 1998 - 9:21 PM PDT
MSiT
I suspected that your use of the word motivation was the economic technical one you outlined above. Unfortunately economics, in spite of Adam Smith's "invisible hand," is very good science when dealing with *aggregate* effects but doesn't really quite hack it when we are dealing with individual human responses, or even individual work group responses.


I understand the reason why economists have to simplify these terms in order to fit them into their econometric equations, but you will understand that when dealing with group dynamics and the psychology of workers such usage is bound to appear simplistic. A man will work all day for the equivalent of a pack of cigarettes in prison, or something like that, but out of prison he'd rather kill someone than work for union rates.

What I am suggesting is that by reducing motivation to simply effort so that you can quantify it you eocnomists have robbed the term of its effectiveness except as a historical tool. That is you have robbed it of its predictive ability because you have no interest in the sociological, environmental, historical or psychological factors that have actually set those figures.

I have in the past earned good grades for setting down equations where the aggressiveness of the unions were represented by a single symbol, but how predictive could that be when I ignored the psychology of the workers, or the politcal or sociological undercurrents affecting the unions. This describes the limitations of economic analysis without denying its usefulness.

What I am suggesting is that many economists are guilty of a kind of reification which A.N. Whitehead ("Science and the Modern World")called "The fallacy of misplaced concreteness." You have used the limited definition and equation for motivation and effort so often that you have forgotten that these are just mental constructs used by economists, and that motivation is a much richer and far

1934. Msivorytower - May 27, 1998 - 9:29 PM PDT
Look Brerlou

Why don't you just DEFINE how you're using the term. Precisely if you can. Then we can go on from there.

Otherwise your comments don't add much. Vague nuances about what a broader use of the term motivation can do in terms of understanding the micro level better doesn't move me. Nor does it add any greater clarity.

You can accuse economists of many things, but lack of clarity wrt the terms they use isn't one of them.

1935. BrerLou - May 27, 1998 - 9:49 PM PDT
MSiT
Motivation is a much richer and far more complex concept than e.g. "effort= 2 = motivation". I think you might be mistaking an equation for an equivalence. (No, don't throw it!)

CalGal:
I am an INTJ. I think the term NT was also used, and one I liked, "Mastermind." I've never had that term applied to me before. However I was told that the results were so borderline that I could easily morph into another personality under changing situations.

Well who wants to be a stick in the mud, anyway? I dreamt a whole episode of Star Trek the other night, I was Scottie, of course, so I am also quite creative, I guess. How well do INTPs and INTJs get along togther?

1936. Msivorytower - May 27, 1998 - 9:54 PM PDT
Okay that's it for me Brerlou.

You can't even give a working conceptualization of what you mean by the term, then I don't have much interest in continuing this discussion with you.

1937. CalGal - May 27, 1998 - 10:07 PM PDT
Brerlou,

You're not a J. If you were you would have told the Ms EXACTLY what you mean by the term.

You're almost certainly a Perceiver who is anal about getting work stuff done. See this and read the descriptions and see which one sounds more the way you feel, rather than focusing on behavior.

INTJs and INTPs never get along. (g). Well. BoomerJeff and I get along, but that's a rarity. If you have any other questions, post them in Big Questions.

1938. elliot803 - May 27, 1998 - 10:22 PM PDT
Stumbo:

"I didn't claim that "effort is probably genetic-based" -- I said that the extent to which one enjoys making efforts is based on genes *and/or* upbringing."

You said: "Of course (has this point been made yet?), one can easily argue that laziness (or lack thereof) is a product of either genes or environment -- so, paying for effort is just as immoral as paying for results..."

The only way "paying for effort can be just as immoral as paying for results" under the principle I articulated is if effort is determined by factors beyond the control of the individual to the same degree that genetic endowment is; which is to say, completely beyond the control of the individual. Since no sane human being actually believes that effort is completely beyond the control of the individual, your argument is absurd.

1939. BrerLou - May 27, 1998 - 10:46 PM PDT
Well I think that there are internal and external factors determining motivation. Among the external factors are how well the employer manages his human resources. Among the internal factors are the personality traits which include the individual's genetic traits. (But this was just supposed to be an aside not a distraction from the main argument.)

You asked for a definition of effort which I started and which got lost somehow. Effort is nothing more than diligence over time. This definition attempts to eliminate loafing, and to penalise those brilliant procrastinators who create havoc in a work group, by not working or hiding their efforts, then come out with the piece de resistance at the last minute, making everybody else look bad.

Human Resource and Project Management teaching however does accommodate The CalGal types because so much of their work is done at a subliminal level. You know creative types who go to bed with a hard problem and awaken next morning with solution in hand.

I had a brief foray into running a small building contractor enterprise which my father had started when he left teaching. I used three different kinds of payment methods. I found that the best approach with the workers was to let those who preferred to work by the hour to do so, and to let those who preferred to be paid for their output work that way. The third type of worker worked as a sub-contractor and would offer to finish a piece of work for me for an agreed upon price.

If the time worker loafed he was fired. If the piece worker produced shoddy work he was required to do it over. I'd lose the materials so that was my incentive to supervise effectively or hire a good foreman. If the sub-contractor failed to deliver good work on time, he was hit with a penalty clause and would have to pay for any spoiled work. I believe a similar flexibility is necessary in the modern work-place.

1940. CalGal - May 27, 1998 - 10:52 PM PDT
Brerlou,

First off. You came up with this definition just to *prove* you're a J, right? (g)

Second:

"This definition attempts to eliminate loafing, and to penalise those brilliant procrastinators who create havoc in a work group, by not working or hiding their efforts, then come out with the piece de resistance at the last minute, making everybody else look bad."

and

"Human Resource and Project Management teaching however does accommodate The CalGal types because so much of their work is done at a subliminal level. "

Are these equivalent? The CalGal Type and the above? I mean--as far as work is concerned that *is* me--I'm just wondering if I've mentioned this before or not. Or you just figured me out? I must have talked about it and forgotten.

I agree with your approach, btw. And use it myself.

1941. BrerLou - May 27, 1998 - 10:58 PM PDT
So there are people who should be paid as CalGal suggests, and people who should be paid for time on the job. Some people should also be rewarded for the quantity of their output , whilst others should just be left alone to do the job and deliver on time, with penalty clauses. [What Tracy Kidder describes as the mushroom technique "The Soul of A New Machine". Leave them in the dark, (isolate them) and shovel plenty of (bull) manure on them. You know, "The Dirty Dozen" technique].

It is from this perspective of "Different Strokes for Different Folks" that I refused to accept MSiT's equation at face value. I'm simply coming from a Management rather than an Economic perspective.

The key person in any enterprise which does group work would therefore be the project manager. He should have the power to select people from anywhere in the organization or even bring in outside people. He should also be allowed to negotiate separate terms of remuneration for the duration of the project alone, and of course the person should have the right to stand down from the project if they so desired. The proviso would be of course that no one should be required to take a cut in pay. It is quite conceivable that people within the same group should be working under different agreements.

This kind of thinking explains modern day interest in the temperament testing CalGal keeps referring to.

1942. CalGal - May 27, 1998 - 11:05 PM PDT
Brer,

"The key person in any enterprise which does group work would therefore be the project manager. "

Oh, my GOD. You're one of THEM!

"This kind of thinking explains modern day interest in the temperament testing CalGal keeps referring to."

Well, actually I heartily disapprove of hiring by temperament. I believe that people will find the level of employment that they want and it will be a combination of temperament and the results of their work.

In general, the ones who produce measurable results in five minutes will obviously not want salary. They'd rather have five jobs all paying them huge amounts of money to produce regardless of time worked. And they've still worked less than half an hour. And others will like the security of a salary.

Those preferring each model will often have similar temperaments, but that's not required. Nor would I recommend testing for temperament to try and predict results.

1943. Stumbo - May 27, 1998 - 11:15 PM PDT
Elliot:

Let's say that person A is dumber than person B. So, it takes A more of a mental effort to solve some problem than it takes B. You claim that, therefore, A should be paid more than B, for achieving the same result.

Now, let's say that person C is lazier than person D. So, it's harder (or, if you prefer, it takes more of a meta-effort) for C to make the same effort as for D. So, why shouldn't C be paid more than D, for making the same effort?

It's that simple.

1944. Slackjaw - May 27, 1998 - 11:20 PM PDT
would that I had more time for fraying these days.

Suffice it to say that critiques of economic modeling based on the idea that one-dimensional parameters (for, say, aggressiveness or effort) are the essence of the approach are, shall we say, wide of the mark.

1945. BrerLou - May 27, 1998 - 11:20 PM PDT
Listen Gal, you may have noticed that I rarely get an opportunity to indulge in this type of Slate dialogue. It's 2am where I am. I told you I was a Pretender type. I can be anything I want to be. I hate repitition, (except in music).

I wrote a much more detailed definition long ago and somehow the Slate wiped it clean. I never even saw your response until after I had posted the last one. After you have corrected a thousand scripts you tend to be compulsive about your own typos, that's conditioning not genetic. You'd find I'm not at all anal in other respects!

Language, English Language, is my thing, so I put in a little more effort and time in my responses, so I take a little longer to look at what I write, so I don't get paid for it, so sue me. When I look around this Soho of mine, I wish I was just a little more anal compulsive.

1946. CalGal - May 27, 1998 - 11:21 PM PDT
Brer,

???????????

Did you think I was attacking you? I love your posts!

1947. BrerLou - May 28, 1998 - 12:11 AM PDT
Well SlackJaw,
I've had some final year economics classes, but an economist I'm not! I was merely suggesting that economists should avoid the temptation of thinking that their models are anything more than abstractions from a very much more complex reality. I mean, this is what models are, by definition (except for isomorphic mappings).

I never intended to suggest anything about the intent or the essence of economic modelling. I at least understood something of the methods and the constraints of economics as a discipline. Most of these constraints are shared with the other social sciences in general. I've defended these against the charge of being pseudo-sciences before, so I'd hardly be making that charge myself now.

To point out the fallacy of misplaced concreteness is not a criticism of the model, or theoretical modelling techniques. It points out the individual error of mistaking the model for the extent of reality. This is the essence of MSiT's error in not understanding either the relevance or the truth of the part that genetics plays in motivation.

1948. BrerLou - May 28, 1998 - 12:13 AM PDT
Well SlackJaw,
I've had some final year economics classes, but an economist I'm not! I was merely suggesting that economists should avoid the temptation of thinking that their models are anything more than abstractions from a very much more complex reality. I mean, this is what models are, by definition (except for isomorphic mappings).

I never intended to suggest anything about the intent or the essence of economic modelling. I at least understood something of the methods and the constraints of economics as a discipline. Most of these constraints are shared with the other social sciences in general. I've defended these against the charge of being pseudo-sciences before, so I'd hardly be making that charge myself now.

To point out the fallacy of misplaced concreteness is not a criticism of the model, or theoretical modelling techniques. It points out the individual error of mistaking the model for the extent of reality. This is the essence of MSiT's error in not understanding either the relevance or the truth of the part that genetics plays in motivation.

1949. Msivorytower - May 28, 1998 - 6:44 AM PDT
Brerlou

I haven't failed to understand your view. It simply doesn't help much. For instance, you may use a multitiered approach to setting wages in a firm, this isn't any more complicated than defining three types of workers: contract, salaried, hourly. No mystery here. That there are different people who choose to work under any one of these arrangements is accomodated in my discussion of the continuum of labor/effort or effort/leisure or labor/leisure (however one wants to conceptualize it).

I fail to see how your comments in *any* way show the approach I took to be limiting. In fact, it is a simple example of it. Do you think economic models care HOW managers find workers to fit each group? No, only that a profit maximizing employer will determine this arrangement, and then use it.

Who fits into what slot then, is dependent on how individuals perceive the *incentives*, and that can be different for large numbers of people.

I see no additional information given by your perspective that is relevant to an economic understanding of how labor maximizes its own interests and how that intersects with the firm.

Your strawman reminds me why I dislike business programs.

1950. BrerLou - May 28, 1998 - 3:18 PM PDT
MSiT:
If the discussion in progress was in fact specific to the topic you have delineated above, then I owe you an apology for jumping in without taking the trouble to read the back posts, thereby taking your statement out of context. I should have known better since this is after all an economics thread.

As to how I could make a mistake like that, I can only say that when I come across a discussion on genetics and motivation I think this is a discussion on management, and what managers should be concerned about, wherever it is taking place. Genetics has very little to do with economics which covers the whole gamut of human types as you correctly pointed out. If you had said that such an approach was irrelevant to your discussion,when it was made, (not that you should have), I would have shut up and listened.

As for management programs, they simply have different concerns that's all, that doesn't invalidate them. What's to like or dislike? On the other hand, the behaviour of managers in general *is* a matter for economic concern, whether they are indulging in profit-maximizing or simply satisficing behaviour. Both labor and management need to listen to what economists have to say as to how their behavior affects the economy, and vice versa, and their conclusions are not irrelevant because they feed back into your economic models.

1951. BrerLou - May 28, 1998 - 3:21 PM PDT
MSiT said:
"I see no additional information given by your perspective that is relevant to an economic understanding of how labor maximizes its own interests and how that intersects with the firm."

I don't believe for a minute that preferences remain the same, *even in the aggregate*, because tastes change from one era to another. The shift from the time card to the project approach is relevant because it comes under the broad economic concept of technological change. To the firm it may represent increased productivity. To the worker it may represent an opportunity for increased earnings, or an unnaceptable burden.

Given the psychology of the worker, it may not or may not be a viable option. Inidvidually it may not be a concern, but if it represents a trend, as it probably is, it may even explain why increased labor costs may actually be accompanied by an even greater increase in productivity.

Unless you economists keep track of these changes, even understand how the managerial decisions that cause them come about, you may not understand why labor contracts go abroad, for example, so it seems to me. The model remains correct, of course, but for an era that may be past.

The psychology of modern workers, like CalGal for example, if it reflects modern trends has to be relevant, because modern trends may actually invalidate basic assumptions of the model, so I understand. What's a paradigm shift?

Experts like yourself can always make laymen like myself appear ridiculous by demanding more and more detail until you reach a level of abstraction that the layman can't achieve. But is that detail really necessary at this level?

1952. Msivorytower - May 28, 1998 - 4:00 PM PDT
Brerlou

"I don't believe for a minute that preferences remain the same, *even in the aggregate*, because tastes change from one era to another."

Well who said they do (remain the same)? There's nothing in any economic model that doesn't adjust for this, in fact, it's explicit.

Economists routinely deal with this under the rubric of tastes and preferences. Do we track whether tastes and preferences change? Yes, we do, and we can pretty accurately capture what can happen in the future with a hypothetical change in tastes and preferences.

In addition, although I didn't specifically reference this in my earlier posts, the decisions labor makes wrt the hours they offer, the wages they prefer, the effort they are willing to expend really depends on the interaction of two effects: the substitution effect and the income effect on individuals. Both are affected by tastes and preferences.

You also seem to be under the mistaken impression that economic models are static rather than dynamic. They are static only to the extent that we tend to analyze the impact of changes in one factor (in the model), while holding all else constant; the famous ceritus paribus conditions. After examining single factor effects, we then put them all together to analyze a more dynamic situation.

More sophisticated models even solve all equations simulaneously. Actually, this is quite common.

So, there is really little fear that economists will be the ones lagging in their models, if anything, they tend to be ahead of the curve.

1953. Msivorytower - May 28, 1998 - 4:01 PM PDT
Btw,

My discussion with you wasn't meant to make you look ridiculous, I was just trying to figure out the basis for your criticism.

1954. BrerLou - May 28, 1998 - 9:54 PM PDT
O.K.

1955. CalGal - May 28, 1998 - 9:56 PM PDT
Brerlou,

You never answered my question? I'm sorry if I offended you.

1956. BunEBear - May 29, 1998 - 3:03 PM PDT
Slackjaw:
If you're around, ChristinO said this in "BigQuestions":

"At the risk of having Slackjaw come in here and totally waste my ass, not EVERYTHING is about economics"

Go ahead, Waste her.

1957. Slackjaw - May 29, 1998 - 3:08 PM PDT
thanks

1958. Slackjaw - May 29, 1998 - 3:29 PM PDT
Brerlou:

trust me, we know our models are abstractions. How else could we justify mistakes?

Re. the limits of economic modeling: I suppose there are some, but they are not (in principle) the ones you have identified. E.g., if the "psychology of workers" is relevant and beyond the purview of some model, the model is misspecified. Either the set of agents, or each agent's set of actions, or their payoff functions, or their prior beliefs (e.g., what would my mother think?) are wrong or incomplete in an important way (else there would be no problem). Yet the modeling techniques we use are more than flexible enough to deal with these problems. Indeed, there are those who spend there time proving theorems about stuff like this--can you ever give us a game so complicated (in terms of its information structure or whatever) that we cannot model it? The answer to that one is no.

We have a hard time with probability biases, but give us a while. We're working on it.

1959. Slackjaw - May 29, 1998 - 9:51 PM PDT
Incidentally, those same probability biases humans exhibit are the foundation of Gawande's opposition to markets for organs (see Medical Examiner). The idea is that market outcomes will get screwed up as a result.

It's kind of a lame argument, though. First, he goes on for a while about how patients under duress are especially error prone, but those aren't the people one would expect to make up the bulk of the supply side. Suppliers could be made to wait a while, to properly consider the decision, etc. And God knows how much consultation they'd get from the hospital staff.

Second, while the judgment biases mentioned in the article spell trouble for the predictions of an economic theory based on agents without the biases, organ suppliers, in their consulations, can be made aware of the problems to correct for them. This debate first emerged in the '50s, when the economic theory of choice under uncertainty was criticized on the grounds that nobody acts that way (remember the rationality thread?). One response was, who cares? When informed of systematic mistakes, people can correct for them. That response is unsatisfying if you are trying to predict how ordinary people make choices in unstructured environments, because they don't have access to an expert. In this context, one can be made available rather easily.

1960. BrerLou - May 30, 1998 - 1:29 AM PDT
Sorry, California,
the time difference doesn't help, I'm always several hours sleepier than you Westeners, if that's your location. I was hit by a wave of sleep which wiped my Slate clean. No time for goodbyes.

People like me don't get offended, we just withdraw our pseudopodia. In my first post to the Fray I said to someone that there were no stupid answers and got hammered for it. What I should have said was that all answers are grist for the mill to a writer, which I have always been by inclination, though not by occupation. Actually, I was merely echoing a friend who once told me, "To us painters there are no ugly people."

As far as your personality is concerned, I was loth to respond because, firstly, the brilliant loner I described was actully a composite with only some of your characteristics, (paragraph after next); and secondly, I didn't want to fly off at a tangent again, however interesting.

No, I didn't get a mental picture of you from a single post, but I keep doing extrapolations based on people's posts, and correcting for error, from later observation, like in Slack's & MiT's models). Don't we all? I can't see you as an introvert though, because in your posting you're not.

(I can't imagine you deliberately withholding critical information from a group so that you could look good later, but from your posts I can imagine you waiting until the last minute and then pounding out several pages of flawless code). I suppose you don't get to write much code these days.

No, I'm not a project director, (INTJ's all?) although I have the basic academic requirements for the job. I'm presently an entrepreneur, (same thing?)who is finding that business is a little like a jealous, demanding mistress, and she's jealous of the Fray right now.

1961. BrerLou - May 30, 1998 - 7:28 AM PDT
Reference: Kuhn, Thomas, S., "The Structure of Scientific Revolutions", Second Edition, Enlarged, The University of Chicago Press, Chicago, 1970(1962).

So, anyone, did Kuhn's work on "paradigm shifts" have any bearing on the way you think about your economic models then? ("Anything you say will be (duly noted) and used against you as evidence.") I know that management science has now taken over and watered down the expression.

My economics professor at college seemed to think so, but it wasn't a part of the course. I've always wanted to find out what he could have meant. Sorry now I switched my course to a minor, but I didn't want to become a hack. Now I can't remember much of my economics.

1962. CalGal - May 30, 1998 - 10:33 PM PDT
Brer,

Oh, I didn't need such a detailed response. Sorry! It makes sense that it was a composite. And no, I wouldn't withhold information.

That wasn't the question I was asking about. In 1945 you seemed upset and I asked in 1946 if you thought I was attacking you. That's all.

1963. Slackjaw - May 31, 1998 - 1:16 AM PDT
BrerLou:

re. paradigm shifts: I'd draw a distinction between the conduct of macro and microeconomics, as they are called (horrible names, imho--there is but one economics). In micro, once in a great while somebody comes up with a technique that dramatically extends the range of problems we can tackle--I mean things like dynamic programming and game theory. Nobody ever has any real resistance to these things--the only question is whether it's a new fad or whether it'll become big enough to make it worthwhile to learn the new techniques. So it takes a while to spread. There is debate about whether the techniques are useful, but not usually about their veracity within their range of applicability.

Contrast with macro, where a debate has raged for 20-odd years between a couple dominant factions. They advance fundamentally different worldviews--one has it that aggregate fluctuations are equilibrium phenomena, another that these fluctuations are in some sense disequilibrium phenomena. This appears to be more in line with what I think of as paradigm struggles in other sciences. In a sense, one side has won a big part of the struggle, as now, at the very least, most respectable macro is based on micro, the optimizing behavior of individual agents; this was an objection to old-fashioned Keynesian macro levied by the equilibrium theorists. Per Kuhn, the opponents appear to be getting old, rather than changing their minds, and new macroeconomists, even neoKeynesians, appear to have accepted that particular objection.

But I am not the resident macroeconomist. He is in France at the moment.

Incidentally, it sounds like you use "management science" in place of "management," and I recall some other people around here using it similarly. I was of the belief that MS is basically a different name for operations research, which is a far, far cry from management. Management science, where I come from, is not the same as TQM and things

1964. Msivorytower - May 31, 1998 - 8:46 AM PDT
Slack

I'd disagree that the debate between Keynesians and neoclassical economists within the macroeconomic domain constitutes paradigm shifts in the Kuhnian sense. Paradigm shifts according to Kuhn would mean a complete revolution at the theoretical level. The world would suddenly have totally different explanations than previously. The Keynesian/Neoclassical debates were never that far apart, particularly wrt long run growth conditions.

The real debates were over short-run equilibriums and the role of fiscal policies in either creating the conditions for equilibriums or inhibiting them.

I think the move to formal modeling in economics, under Marshall, represents more of a paradigm shift in economics than any recent debates in the field. Introducing mathematical problem solving techniques to economic explanations allowed the formal development of theorems and models that could then be tested and further refined. We really had no way of formalizing the notion of equilibrium prior to this, and it fundamentally changed the WAY we thought about the economic order, and the questions we could answer.

1965. Msivorytower - May 31, 1998 - 8:50 AM PDT
Well, not under Marshall, starting with Marshall.

1966. Slackjaw - May 31, 1998 - 1:27 PM PDT
It's not that I think micro NEVER had a "paradigm shift." In fact I agree that the change from basically literary to formal models is a good example. Even now, when new tools are introduced, we do change our view of part of the world, in a sense. But since the move to formal modeling, it's in the sense of going from darkness to light--some things were previously inexplicable but are not anymore. The reason these don't fall under Kuhn's analysis in modern micro is that there is no real opposition. Thus, his assessment of how new paradigms rise does not apply--there is no old guard to die off. Instead, practicing economists, mid career, learned about things like game theory and dynamic programming when their utility became clear. The alternative argument about how to view that piece of the world is null. It's closer to paradigm creation than paradigm shift, though that's too strong because it's simply an extension of the view of some parts of the world to other parts.

Keynes introduced the notion that supply might not equal demand for a period of a few years ("in the long run we're all dead"). This is a very different conception of the world than Marshallians & Walrasians had been used to with instantaneous adjustment. It's more than simply a debate over the best course of policy--those can arise for many reasons, including informational issues (e.g., Hayek) or ideological issues (e.g., libertarians). In this case they arise because the worldview of one side means there is simply nothing for the government to do.

1967. Slackjaw - May 31, 1998 - 1:28 PM PDT
Anyway, it doesn't matter how far apart Keynesians and REs are in some absolute sense. In the many respects, Einstein and Newton weren't that far apart. Yes, now both sides accept that macro must have solid microfoundations (which is also a paradigm shift, in Kuhn's sense, imo). Even Keynesian models look a lot different than they used to. But they disagree over the practical import of frictions in the short run (can they keep aggregate demand in a depressed state?) and how different in character the short run is from the long run. They are far enough apart for this debate to have preoccupied a good part of macroeconomic theory in the last 20-25 years, since it first began.

1968. Msivorytower - May 31, 1998 - 1:35 PM PDT
Slack

But Kuhn doesn't argue that there can't be competing theories within a major paradigm, rather that the theories can't be so fundamentally, earth-shatteringly different that accepted thinking is completely turned on its head.

I can see the early classical versus Keynesian debates approaching this, but even then, they accepted that the LONG run conditions would be similar in the two views. It was HOW one got to the long run that was at the heart of this particular debate, or so it seems to me.

The debates between neo-classical economists and Keynesians in the last 20 years haven't even been as earth shattering, since even neo-classical economists today wouldn't advocate the kind of lassez faire policies that existed prior to the Keynesian revolution.

1969. Msivorytower - May 31, 1998 - 1:37 PM PDT
Okay, I can agree with your last post.

Again, though, my understanding of Kuhn's paradigm shifts would suggest something different than the gradual consensus shifts that have occurred in macro and micro economics over this century (and it's been happening for about that long).

1970. brerlou - May 31, 1998 - 5:35 PM PDT
Back in the late '80s I once predicted the eventual end of Communism in Russia based not on the economic factors that eventually brought them down but on their utter inability to continue to block the spread of information into the country. I predicted the downfall of the S. African regime based on the same cause. To my amazement the one happened within a year of my prediction, and the other not some decades later as I had predicted but within a matter of months.

Now, my prediction might have been a happy coincidence, a fluke, but I sometimes wonder if economic models don't seem justified sometimes because they may be unable to distinguish between coincidence and causation. Is it not possible that two economic phenomena may have a common perhaps ignored cause, whilst your models demonstrate a correlation which is then mistaken for cause and effect?

Suppose, for example, changes in supply are caused not by changes in demand but by increases in the access to information by the suppliers? It may then be possible that it is the existence of supply which is permitting increased consumption, whilst the latter is mistakenly perceived as indicating a demand which predated supply.

I had imagined that a paradigm shift would be like a situation where economists began junking the familiar demand supply curves in favour of models which displayed the spread of communication technology as the prexisting cause and demand supply as two coincident effects. How revolutionary would such a change be, and has anything like that ever happened in economics?

1971. Slackjaw - May 31, 1998 - 11:08 PM PDT
Msit:

True, a lot of important developments in economics have been gradual. OTOH, as you said to me yesterday in TBQ, the speed with which RE became one of the dominant schools in macro was quite brisk. Before that, there was very little percolation against the old Keynesian view. (The reason macro is a contender for a Kuhnian paradigm struggle and micro isn't is that we don't even have "schools" in micro!)

I guess whether modern macro is an example of a paradigm struggle, or whether a paradigm shift occurred in establishing micro foundations for it, depends on what you consider "earth shattering." Sure, the debate can be understood in the terms Keynes invented. But this is true in any scientific debate; there is always some common ground. Natural scientists all accept common structures like atoms and quarks--no revolution is going to overturn that worldview--and economists have common ground too. But, Are people optimizing?, How do they form expectations?, Can features of economic terrain keep demand depressed for substantial lengths?, Is the business cycle an equilibrium phenomenon?, Can anything productive be done about it (EVEN if you accept ideologically that we should act if policy will be effective)?, etc. are, imo, very fundamental issues. As Case and Fair say in their intro. text, "the assumption that expectations are rational radically changes how one views the economy."

The awarding of the Nobel to Lucas was a mistake if he didn't do anything terribly far apart from what his Keynesian predecessors were up to. The Nobel press release cites his "rapid and revolutionary development" leading to "the emergence of an equilibrium theory of business cycles [and] insights into the difficulties of using economic policy to control the economy."

1972. Slackjaw - May 31, 1998 - 11:19 PM PDT
BrerLou:

Many factors influence supply and quantity supplied. You may recall that changes in demand are not thought of as changing supply but rather quantity supplied, and there is a critical difference. Something like new information about market conditions has no necessary impact on a firm's technology and will simply influence the point it chooses on its (unchanging) supply curve. OTOH, new information about production processes, worker productivity, or information technology per se are potential shifters of supply functions themselves. Comparative statics--how market equilibrium changes in response to changes in underlying parameters (like the state of market demand)--is well understood and borne out in reality. Why on earth would we reject this model? It works extremely well.

I don't understand your remarks about distinguishing correlation and causation as an impediment to theory. That's why we have theory in the first place--to flesh out causality.

I assure you that the notions of demand and supply, and of equilibrium, aren't going anywhere.

What type of "information" do you think couldn't be stopped from spreading in S. Africa and the USSR? Given the actual events that led to the fall of the Soviet Union, how do you feel that your prediction about the cause of its demise is borne out?

1973. wexxford1 - June 1, 1998 - 3:49 AM PDT
Fortune magazine's latest survey of economists shows they have not the slightest clue why the styock market has moved up to record levels . Did a single economist resign or get fired? Of cooorse not,babies. This is the bubble economy,fraygrants.To make things even more hilarious, Intel announced at its annual stock owners meeting it would put $8 billion into capital spending programs next year. Result : stock gets creamed. Hilarious ripple in the bubble- bubble .We know there are 900,000 lawyers hanging around in a deregulated economy,somehow getting their begging bowles filled .( Sure, the lewinski thing keeps a few hundred in car payments, but what about the big picture?)Now for the Q of ther day. How many blindsided economists are there and how do they pay their grocery bills?One for pseudo, now that he claims he alone was the little fella who invented game theory, and is the only one with a ticket to explain it .

1974. brerlou - June 1, 1998 - 4:35 AM PDT
The Soviet Union had been masters at putting their own spin on world events and interpreting them as they wished to their own people. They had projected an image of decadence and despair in the West to their people which said that capitalism was a material success for some but otherwise a bust to the great majority.

They stole many of the industrial secrets devloped under the intellectual freedom of the capitalist system, but they couldn't steal the systemic free trading of information which made these inventions possible. No Soviet citzen would go out into his garage and put together the prototype for the Apple or PCDOS.

I was writing at a time before the actual political events that you refer to took place. I had always imagined that Soviet technology had been able to totally restrict news about the realities of existence in the non-communist world from their people. A number of articles and reports made me realise that the ordinary citizens in Russia had become well aware that the ordinary citizen in the capitalist world lived better than most of their top officials.

The rapid recovery of the economies of Japan and West Germany constituted proof to the man in the streets that capitalism could also work for totally ruined economies and gave them hope that it could work for them. The dis-economies of a system where "We pretend to work and they pretend to pay," were evident to them by comparison.

Regan's Star Wars initiative too and the failure of the Afghanistan initiative had also made it clear even to the most rabid expansionist that the money invested, at great sacrifice, into military areas was not going to yield a return. (I view the Star Wars initiative as a hugely expensive bluff which the Soviets could not afford to call).

1975. brerlou - June 1, 1998 - 4:59 AM PDT
Things like the black market in blue jeans, walkmans, and other trappings of capitalism were evidence to me of a hankering after a life-style that they knew they could never achieve under a command economy. This is the background against which the political events took place. If the bureau of disinformation and the jamming of the air-waves and travel restrictions could have succeeded to the level of say Orwell's 1984, this background would have been totally different.

The white captain of the S.African cricket team, tough guy, burst into tears, when he met the black cricketing legend, Sir Garfield Sobers for the first time. Imagine a Cuban or Russian basketballer of equal talent being kept from competing against the likes of Larry Bird and Michael Jordan his whole life. Isolation hurts even more when you know what the other fellow is enjoying. I never imagined however that the change in S. Africa would have taken place so soon. Knowledge as to how the world viewed (or was determined to view) Mandela and how the world leader, the USA, viewed Martin Luther King probably weakened their resolve.

I think the will of the people, though not respected individually, under both regimes eventually seeped sufficiently into the higher reaches of the administration as to cause them to change the course of their history. Otherwise, opponents of the change would have been able to mount a stronger resistance, especially since both changes were in the direction of increased liberty of the ordinary citizen. It is the spread of information of the world beyond that made the change in the people so widespread.

1976. jbaird - June 1, 1998 - 10:19 AM PDT
Brerlou:

"The Soviet Union had been masters at putting
their own spin on world events and interpreting
them as they wished to their own people."

They were nowhere near as efficient at this as the commissars of the American Empire. For instance, the truth about the Afganistan invasion was fairly common knowledge in the old S.U., while the truth about the Vietnam invasion still can't be printed in any "repectable" newspaper here.

The US made better computers and aircraft, why wouldn't it make better propaganda?

1977. BrerLou - June 1, 1998 - 3:43 PM PDT
Do you really think those pictures of the MyLai victims would have made it on to the S.U. headlines as they did in the U.S.?

How about that heart wrenching picture of that beautiful pre-pubescent child, running naked and exposed down the streets, holding her blackened forearm up for all the fathers and mothers of the world to see? I tell you, my wife cried and I awakened twice that night wanting to reach out and cover her with my coat away from the cameras intruding on her pain.

The Soviets would have done a better job of suppressing such material. Perhaps "masters" was an overstatemnt, but they certainly tried harder.

1978. BrerLou - June 1, 1998 - 3:48 PM PDT
But I don't want to keep leading the dialogue astray from economics and the question. "Is economics (the discipline) entering a new era?" or was it, "Are we (the world) entering a new economic era?" Slackjaw and MSiT seem to think no to both, or is it they would just be more comfortable thinking this?

Not that I can't understand their rationale: Economics is a study of the essential human animal, functioning in an environment of scarce resources, therefore certain things must hold as constant as human nature and needs.

But is the era of "scarce resources" coming to and end? Silicon is in no short supply, and we use it not only in our chips but in our fibre optics. As we learn to handle, even modify genetically, our human resources the supply of special types will become less and less scarce. International competition will make human genetic engineering inevitable.

We may be entering an era as different from the 20th Century as Quantum Physics is from Newtonian. Will we similarly be needing new paradigms? Will food energy become as accessable as water? Will small nations begin launching pre-emptive nuclear strikes against each other? Will they attempt to substitute nuclear energy for mineral fuel? Will global warming innundate small nation states and pauperise larger ones?

It may not be the analytical methods of economics that may be in question it may well be the data. It may not be the solution sets that should be questioned for accuracy, but the problem sets that need to be re-examined for relevance.

1979. Msivorytower - June 1, 1998 - 4:17 PM PDT
BrerLou

Personally, I think you need to clarify what you mean by a paradigm, according to Kuhn. This is perhaps the most abused word in modern social sciences, so naturally, I'm skeptical about your seemingly loose use of it.

Why don't you discuss what you think it means, and we all hash that out. I've felt since my conversation with Slackjaw that this is necessary if we go much farther with this concept.

Second, I really think you WANT to believe that economic models are lacking the ability to be flexible and predictive under changing conditions. I just can't see it. The models, in and of themselves are certainly able to deal with any and all that you've identified so far.

Additionally, I have a hard time believing we no longer operate in a world of scarcity. Some resources become less scarce as substitutes for them are invented, created or found. But to claim that scarcity of resources will not be an issue in the next century? Are you suggesting that we are at the brink of a world where there is no starvation? No lack of basic foods, shelter, education, transportation, etc?

Have wants and needs of individuals lessened as countries have developed in the world? No. In fact, economic development brings greater competition for consumption and use of world resources. Consequently, we will still face resource scarcity on a global level.

1980. Slackjaw - June 1, 1998 - 5:03 PM PDT
BrerLou:

Ohhhhh. Now I see the problem. You must cease at once all reading of "The New Economy" section of Forbes or whatever, and get yourself reacquainted with your econ textbooks. Then we can tackle new developments in production.

I agree 100% with Msit's assessment about the need for clarification of paradigm shifts, your ostensible desire to render mainstream economics defunct, and the continuing reality of scarcity in human life.

1981. jbaird - June 2, 1998 - 8:44 AM PDT
Brerlou

"The Soviets would have done a better job of
suppressing such material. Perhaps "masters"
was an overstatemnt, but they certainly tried
harder."

True - but that's the difference between a totalitarian society and a "free" one, where official press censorship is not practiced. The Soviets could (and did) throw people who said the wrong things about Afganistan in insane asylums for "reeducation"; our commissarshave to be more subtle.

Yes, the Mai Lai pictures and other horrific photographs and news footage were published in the U.S. - but only after 1968, when the business community had turned against the war. (and you'll note they didn't make the same mistake by showing pictures of the 100,000+ victims of the Gulf Massacere; somehow Amry bulldozers burying Iraqis alive was not deemed "newsworthy")

Censorship in this country is not carried out by government bureaus; it's carried out by writers and editors and publishers who feel that printing certain things "just wouldn't do", in Orwell's phrase.

Sorry about intruding into your Economics discussion, but I had to respond.

1982. BrerLou - June 3, 1998 - 6:54 AM PDT
If the topic is economics I know I am out of my depth right away, but that doesn't do a thing for my curiosity. So, I ask these question of experts because that's what experts are for, IMO.

When I hear the word, paradigm, in economics, I think of a model, usually a set of equations, which comprehensively exemplifies a specific economic situation across a number of cases, thereby identifying those cases as typical of that particular situation. The paradigm has to be comprehensive, not the cases.

Perhaps I am seeking reassurances. I am certainly not qualified to be critical. MsIT's recounting of instances of scarcity in the now world does nothing to reassure me, since I am looking to the future and the removal of scarcity could be in even a single commodity. If for example, say the Chinese, were to clone an immense number of their greatest minds thereby removing the scarcity of a very critical resource in a matter of two decades, would our economic models be able to project for the effect of this new situation on the world economy. This change in their bell curve itself would constitute a paradigm shift would it not, since the bell curve is itself a paradigm of sorts?

The Star Wars initiative represented a paradigm shift which threatened the efficacy of decades of Soviet investment. That's the kind of thing, I'm talking about. The models we trust, influence the data we collect so I think my question is a valid one.

1983. thoughtful - June 3, 1998 - 10:23 AM PDT
Hi Y'all. Just stopped in to see what was happening in this thread.

I'm not sure I understand, BrerLou, what your concern is. I was going to suggest a link to J. Bradford deLong's page, but the document is not there. He did a piece, linked to in this thread awhile back by PseuE, expressing how "technology revolutions" are far more common than we think, and that the time it takes for these new technologies to be have an impact on economic activity are longer than we think. Therefore, the idea that we are on the brink of a new revolution, which will drastically change how we live, doesn't concern me. Since the beginning of the industrial revolution, that has almost always been the case.

Additionally, we have had economic models for centuries. Some have worked better than others. At times its been the inability of existing models to describe the current economy which has led to the development of new and better models, e.g., Keynes' model as a cure for the Depression.

Does this mean that we throw out old models? Of course not. We don't throw out new ones that fail either. In understanding why a model fails, there is learning.

Does this mean that economic models, because they aren't causative aren't useful? No. As Slackjaw commented, that's why we have economists. No economic model exists in a vacuum. All economic models are part science and part art. It is in understanding and describing the ways in which the model performs as well as fails that these models become still more useful. It is in being required to be explicit about the assumptions that go into models and judgments of why your view varies from the model that greater understanding is achieved.

1984. thoughtful - June 3, 1998 - 10:27 AM PDT
If the concern is that economic models are not flexible enough to meet the challenges of upcoming technology shifts, don't worry. Economic models are as flexible as the economists who develop them; and over the centuries, economists have proved to be a very flexible bunch (also a very argumentative bunch) indeed.

1985. Slackjaw - June 3, 1998 - 12:33 PM PDT
BrerLou:

I am wondering if you have really thought about what it would mean for something not to be scarce. Air is scarce. The implication is, we could all consume literally as much as we wanted and there would still never be an end in sight to the abundance. We may have gobs and gobs of silicon, but it's not going to become free anytime soon.

Anyway, if something became scarce it would have no market price, because its consumption poses no trade off, and this is what prices measure. If the non-scarce product was useful in some production process, those producers would shift their input mix as much as possible in favor of this non-scarce input, as they would not have to give up anything to use it (unlike labor or capital, to which they must pay wages and rents). The economy would experience a possibly dramatic increase in potential output, if many producers can use the newly free input in very great proportions. It would certainly not eliminate scarcity in all other goods, thereby eliminating prices altogether, because there are physical limits to how much one input can be substituted for another while holding output constant, and there's also that pesky thing about the first law of thermodynamics. Anyway, consumer surplus--the sum total of benefits consumers receive from consumption of goods above and beyond their prices--would increase anywhere from a little to a lot, it being impossible to say more without more information on the nature of technologies.

I can't imagine how something that requires any cultivation could fail to be scarce. People who took the cost to cultivate would no longer receive anything in return for their efforts--the infinity of supply implies they can't get anything for it in competitive markets. This in itself would naturally tend to decrease supply.

1986. Slackjaw - June 3, 1998 - 12:35 PM PDT
Thoughtful:

"Does this mean that economic models, because they aren't causative aren't useful?"

Maybe I misunderstood--are you saying that you think economic models do not contain causal relations?

1987. Slackjaw - June 3, 1998 - 12:37 PM PDT
But if, BrerLou, by some absurd circumstance, *all* scarcity were eliminated, then economists would have to find something else to do. There would obviously be no scarcity, and hence no need to make choices, as there are no tradeoffs, and as a result, no economics.

Of course, as long as life spans are finite, so is time from any decision maker's POV, so we'll always have something to say.

1988. thoughtful - June 3, 1998 - 2:31 PM PDT
Slackjaw, I only meant that statistical testing can show correlation, but not causation. Of course, econometric models can be linked to simulate an event and a response, but I wasn't thinking of that at the time. Forgive me.

1989. Slackjaw - June 3, 1998 - 2:39 PM PDT
Ah. Econometric models. Okay, I'm with you. I thought you were referring to theory.

1990. wexxford1 - June 4, 1998 - 4:18 AM PDT
No theory,but real balloon economy work is going on at the stock exchanges . The firm that makes the brains for the personal computer--a fine monopoly these many years,praised by all -- gets slaughtered because a little clerk puts out a negative report.Just why a monopoly suddenly loses value is a mystery unsolved.But the firms that make the boxes to hold the little brain are unaffected, in fact the price of their stock rises .Send one down and two up .This is known as pumping the balloon and there is no end in sight .Remember the David Bowie bond? Now you've got the people's capitalism script.
Everyone in show bidniz-- perhaps everyone walking the streets and everyone everyone capable of making a nuclear device,yes--is a walking IPO.Onwards with all the balloons.

1991. wexxford1 - June 4, 1998 - 4:34 AM PDT
Oh by the way,bubble lovers. Growth for the semiconductor industry,put out by a flack for that trade association,is given as 18% a year for each of the next three years.That'll move sales of semis from $158 billion to $ 222 billion.So why is the stock price of the monopoly that creates the value in the market going d-o-w-n.
Because , silly,the little folks in the people's capitalism economy have to get their begging baskets filled, just like the 900,000 American lawyers who have no place to go in a deregulated world.Move it up, move it down, Lewinski it, deLewinski it . Keep those morons marching in the bubble economy,even if it makes all the media people look like idiots.

1992. Slackjaw - June 4, 1998 - 11:54 AM PDT
Wexxford:

you are a buffoon.

1993. neithart - June 4, 1998 - 5:15 PM PDT
Greetings. I'm a newcomer to the fray.

Wex's understanding of markets does seem a bit odd. Nevertheless, he is trying to focus our attention on some important real world issues. What does one have to assume about the future in terms of economic activity, profibability and interest rates to justify today's stock market valuations? Clear thinking people are answering this question every day. In general, prices have risen because investors feel justified in making positive assumptions --- not because they have been fooled by some conspiracy. The interesting question is why?

Abstract discussions about 'paradigms', 'scarcity', 'production' or economic models don't do much to help answer this question. I'd rather not wait 5-10 years until the econometric models are 'adjusted' to get an answer. Of course, the basic laws of economics have not been repealed. A quick glance at the real world, however, suggests that economic relationships are working differently today than they were 10 or 20 years ago. Do we really understand why US inflation remains below 2% despite a sub 4.5% unemployment rate and booming growth? Why has Japan's economy been sick for the past 7-8 years? What are the implications of European monetary union? These are important issues and I think the weight of evidence suggests that things are different --- in a positive way at least in the US. Why does it matter whether or not this fits somebody's formal definition of a new 'paradigm'.

1994. wexxford1 - June 5, 1998 - 3:52 AM PDT
Just as I forecast,people's capitalism is now flacking the effect that show bidniz people are having on the bubble economy .Michael Jordan, with a tiny little moustache,smiles from the cover of Fortune magazine, June 22,with the question :" Exactly how many billions has he pumped into the economy. " What ? Even given that business magazines have been dumbed down to the level of Fleet Street's lowest-level poop,(" Coo, its a scorcher!") this Fortune outing looks like one a new low .What next ? How much is Pat Day pumping into the economy ?How much is Tom Brokaw pumping into the economy ? How much litle Jeff Katzenberg ?We are now officially in the most ridiculous stage of the bubble economy, where the flacks are in the saddle and the hacks are licking their boots.Keep going pseudo and pals . There is absolutely nothing your grumblins and mumblings can do to stop this monster PR steam roller.

1995. brerlou - June 5, 1998 - 4:03 AM PDT
Because, broadly speaking, economists are the most maligned of all the social scientists. Therefore, they are the most defensive about the limitations of their science. Now a good vulcanologist will tell you straight out that he doesn't have a clue as to when or if she's going to blow.

The truth is that economics can explain what happened, which is useful, but it can't predict. This is because the more informed people are about the past the less likely they are to repeat it, therefore economic prophesies are by nature self defeating, if they depend on past performance. In any event conditions are never the same in the future as they were when the data was collected. So, apparently "Rational Expectations" about the future based on past performance are actually quite irrational when we take a closer look, but who does? I know the experts are going to come down on me for my misleading take on the Rational Expectations Hypothesis.

Now Wexford,
seems to be confusing the Stock Market with the Economy of which the former is not even a good indicator,(talk about correlation and causation!) You can't use the one to predict very much about the other, even though the linkages are strong, because you couldn't see the woods for the trees and vice versa, even in the long term. I wonder if the RE hypothesis gives any insight as to why the stock market will always be even more unpredictable than the economy?

1996. Slackjaw - June 5, 1998 - 4:15 AM PDT
BrerLou:

I beg your pardon--maligned by whom?

There is only one social science accused of intellectual imperialism, and often at the hands of practitioners of other disciplines, no less. It is our methodology that gets used elsewhere, and our formalism that is working its way into other disciplines, not the other way around.

"The truth is that economics can explain what happened, which is useful, but it can't predict." Would you mind limiting your claims to finance, at the very least? You have demonstrated a limited grasp of the whole discipline--how do you feel justified in making such claims?

And have I mentioned that the vast majority of us don't spend our time trying to forecast unemployment?

Yes, you have a very misleading characterization of RE--in fact, diametrically opposed in spirit. What you describe is more like adaptive expectations, which has rather different implications.

1997. Slackjaw - June 5, 1998 - 4:20 AM PDT
Unpredictability of financial markets can be reliably understood, and predicted, thanks to a little diddy called the efficient markets hypothesis. Any information relevant to the value of a security is already reflected in its price.

By the time you get your newspaper, much less your tips from the stock seminar, the relevant information has long been accounted for.

To a good first approximation, stock prices appear to follow a random walk, ostensibly because the useful information has already been accounted for within a matter of minutes, leaving only noise. If there was something predictable in day to day movements, arbitrage would take care of it. (Though there is some percolation on this lately.)

1998. wexxford1 - June 7, 1998 - 4:03 AM PDT
Statistics are poop in the bubble economy, Datamation says 17% of technies over 50 are without work.The millionaire morons who read network "news" for fools saythat employment has never been tighter.Land sakes,we no longer have journalists or reporters on the bubble economy.We have pubic relations specialists,who know from tests that 99.94% of the American public will swallow anything.Should not pseudo and other enthusiastic fraygrants start a campaign to strike a medal for the pubic relations industry workers? Without them fellas, the bubble economy might not exist.P.S. What about this $10 billion that Michael Jordan supposedly pumps into the economy ? Should not Michael be called Mr. Bubble ?

1999. wexxford1 - June 7, 1998 - 4:07 AM PDT
Remember this pseudofella .Economists says they have no explanation for the stocki market bubble.Stop kiddin' the people fella.And for golly's sake stop pretending you are the discoverer of game theory.
The thing is more than half a century old,fella.

2000. Slackjaw - June 7, 1998 - 4:32 AM PDT
I must admit, wexxford, I find your posts very amusing.

Absurd, but funny.

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