This diavlog is an argument for never having two economics profs in a conversation. Or never having two faculty members from the same school. Or maybe just not these two gentlemen.

Deep praise indeed.

This diavlog is an argument for never having two economics profs in a conversation.

Yes, way too much jargon and inside baseball. To Robin's credit, he did issue two warnings about losing 1/2 the viewing audience, but that didn't prevent Tyler from continuing to lapse into the arcane. Still, I found a lot of the chat interesting. Overall grade: B-

The remark about local public goods reminds me of Karl Smith's theory of why diversity reducing trust is a good thing.

I think the inability to "fudge" the results of prediction markets is fatal to the chances of them every being widely adopted. This isn't simply a matter of them not delivering the results that decision makers want ex ante. Even assuming that prediction markets are more accurate than other sorts of forecasting, they aren't going to be correct 100% of the time, and when it does deliver bad results the normal ways of defusing blame won't be available to it the way they are to politicians or C.E.O's. If a politician advocates a particular policy that turns out to be a disaster, he has a large incentive to shift the blame elsewhere, either by minimizing his role in the decision, blaming the bad results on other actors, claiming that things otherwise would have been even worse, etc. He will also have personal connections and loyalty that he can rely on to weather the storm. In a futarchy, by contrast, none of these methods are available, which means that the full blame for even mistakes will fall on the process itself.

Wildly entertaining!

Wow... the beginning of that "predictions markets" discussion has an amazingly inaccurate representation of what managers do. "Building up morale," keeping a good public face, etc., etc. This is a consequence of economists' vast distance from anything vaguely like normal business enterprise. Sadly, economists who chair economics departments are such deplorable managers themselves that economists never understand what trained managers are like. I am a business school researcher who spends a chunk of every day interviewing high level managers. Believe it or not, managers DO make critical decisions with surprising frequency. With regard to prediction markets (about which I know little):
I think that (1) managers often have access to a pool of informants whose collective knowledge is filtered through a network of decision makers that ends up obviating much of the value of predictions markets,
(2) managers do heavily use focus groups to almost the same effect as prediction markets, but economists just don't recognize the use of focus groups as a tool, and
(3) it is hard to phrase most of the host of legitimate performance issues that concern managers day-to-day in terms that could be used within prediction markets. As a result, adoption is

God, talk about painful listening; I had to break out the booze at the 11 minute mark to make it all the way through. I can only imagine what the faculty parties are like at George Mason...wild times.

Quoting xanbristol: Wow... the beginning of that "predictions markets" discussion has an amazingly inaccurate representation of what managers do. "Building up morale," keeping a good public face, etc., etc. This is a consequence of economists' vast distance from anything vaguely like normal business enterprise.

Actually, I believe that Hanson and Cowen's description of what managers do is based on their shared belief that much of human activity is based on the desire of people to signal certain things about themselves to others. Hanson, for example, thinks that an awful lot of medicine is based not on whether what the doctor is doing will actually help the patient, but is rather a way of the doctor to "show that he cares" about the patient's health. It's not objection to this view to say that this isn't how doctors themselves would self-describe what they do, nor would it be much of an objection to point out that doctors to things like administer medical tests and/or perform surgery.

If becoming influential requires you to adopt more conventional opinions, then you aren't really becoming influential.

Quoting Blackadder: If becoming influential requires you to adopt more conventional opinions, then you aren't really becoming influential.

Huh. This sounded really good when I first read it, but then I thought of the entire top-shelf pundit class, who are nothing if not both conventional and influential.

Quoting xanbristol: With regard to prediction markets ... managers often have access to a pool of informants whose collective knowledge is filtered through a network of decision makers that ends up obviating much of the value of predictions markets,
(2) managers do heavily use focus groups to almost the same effect as prediction markets, ...

So even though tests suggest prediction markets can beat the accuracy of what managers say, managers have other secret estimates that beat the markets? Any idea how we could test this theory?

This is the funniest episode ever. I know mentally ill people who sound less insane than these two. Cryogenics! People read fiction to signal their rectitude! Homo economicus in the flesh! In college me and my room-mate both majored in econ, and we'd talk like this too, but we were laughing our asses off.

Awesome! Awesome, Awesome, Awesome!

Quoting Unit: Wildly entertaining!

... hmm, I think this is breaking the no sarcasm rule from Bob. Release the hounds !

Fascinating diavlog... That last segment, though, was really uncomfortable: why wouldn't Robin Hansen just come out and say that he thought that Tyler Cowen has become more boring as he's become more famous? Talk about status-deference...if you need proof of that, you need just go back to the first segment when Robin basically admits that he basically agrees on all substantive issues with Tyler, who just happens to be the guy who hired him. However, this diavlog was illuminating, especially regarding the "meta-" views of the world, and the differences in the way they approach problems. In my view, the big irony is: Tyler Cowen's blog is still interesting, while Robin Hansen's work is still boring (even though he is less famous). I think this is mainly due to Robin's highly rigid and structured view of the world, as opposed to Tyler's pluralism and complexity. Maybe if Robin tried to be more *like* Tyler in this respect (in the approach to problems) than *agree*with*him* on the solutions to problems, his work would be more interesting, and then the fame would come to him too. Sorry if this is harsh. Just trying to call them as I see them. Overall, a

Quoting claymisher: This is the funniest episode ever. I know mentally ill people who sound less insane than these two. Cryogenics! People read fiction to signal their rectitude! Homo economicus in the flesh!

In college me and my room-mate both majored in econ, and we'd talk like this too, but we were laughing our asses off.

I had the sense Tyler was laughing inside the whole time.

Quoting JonIrenicus: ...

hmm, I think this is breaking the no sarcasm rule from Bob. Release the hounds !

Ah! Actually I was totally serious.

Quoting bhf: Fascinating diavlog... That last segment, though, was really uncomfortable: why wouldn't Robin Hansen just come out and say that he thought that Tyler Cowen has become more boring as he's become more famous? Talk about status-deference...if you need proof of that, you need just go back to the first segment when Robin basically admits that he basically agrees on all substantive issues with Tyler, who just happens to be the guy who hired him.

However, this diavlog was illuminating, especially regarding the "meta-" views of the world, and the differences in the way they approach problems. In my view, the big irony is: Tyler Cowen's blog is still interesting, while Robin Hansen's work is still boring (even though he is less famous). I think this is mainly due to Robin's highly rigid and structured view of the world, as opposed to Tyler's pluralism and complexity. Maybe if Robin tried to be more *like* Tyler in this respect (in the approach to problems) than *agree*with*him* on the solutions to problems, his work would be more interesting, and then the fame would come to him too.

Sorry if this is harsh. Just trying to call them as I see them. Overall, a

For the love of God diavloggers. You're not supposed to be having a personal conversation.

Reading the comments here is interesting, sociologically. There is a set of people who actually have, on a daily basis, the kind of conversation that Cowen & Hanson are having here, and it's really very small. I imagine that there are quite a few more people out there, though, who (like me) could have that kind of conversation, people who are both (1) smart and (2) very interested in truth and in understanding the world, the whole thing, all the questions. The kind of people who feel like they have to learn some epistemology because hell, how else are you going to be able to figure out which of your intuitions you should build your belief system on. I don't mean to compare these people to Socrates generally, but...they are truly Socratic in that, for these people, questions that to most folks are just airy-fairy philosophy, the kind of thing you might think about when you're daydreaming, or something... these questions matter. Getting it right matters. I guess it's the analytic philosophical temperament -- but it's a personality type, it isn't restricted to the academic domain of analytic philosophy by any means.

I don't know; I found it pretty interesting. I especially enjoyed the cryonics and sci-fi talk that they lapsed into. (it was a nice reprieve from the mostly-politics discussions on bhtv) Of course, I am a geek, so that might have influenced it some.

Quoting bjkeefe: Huh. This sounded really good when I first read it, but then I thought of the entire top-shelf pundit class, who are nothing if not both conventional and influential.

Are they reacting to convention or is convention reacting to them?

Quoting claymisher: ...Cryogenics...

Actually, they were talking specifically about cryonics; Cryogenics is a much more general physics term. (I once had some cryonicists point the same mistake out to me after I made it, which is the only reason I am pointing it out, haha.)

Quoting Nate: Are they reacting to convention or is convention reacting to them?

Both, certainly, but a lot of what they react to is each other. There is a tendency for an idea to catch hold and then for them all to try to twist everything back into the context of that idea for the next chunk of time -- the dreaded "narrative" aka the "conventional wisdom."

I really enjoyed this diavlog, so I guess I'm in the minority here. I'd love to see more diavlogs with Cowen and Hanson.

I realize I'm not making a profound observation here, but this is one weird-as-heck diavlog.

I forgot to say in my earlier post that I'd love to hear a diavlog with Robin Hanson and Tyler Cowen (either talking to eachother, or with Will Wilkinson) on metaethics.

I would be delighted to hear either of these thoughtful gentleman converse, but they should never--for Godsake!--converse with each other in public.

I always like this kind of episode. The narcissism of small differences highlights how people really think, and shows where their boundaries are. I wonder if these two started out as cyborgs, or if their training in economics made them cyborgs. Probably a little of both. See "Does Studying Economics Inhibit Cooperation?"
http://www.psych.cornell.edu/sec/pub...o,Regan.93.pdf

Quoting bjkeefe: Huh. This sounded really good when I first read it, but then I thought of the entire top-shelf pundit class, who are nothing if not both conventional and influential.

Are they actually influential, or does it just appear that way?

Quoting Blackadder: Are they actually influential, or does it just appear that way?

I think they actually are. Obviously, not universally so, and happily, with the rise of the Web, decreasingly so. But millions of people still watch the Sunday yakfests, and read the opinion pages of the NYT, WaPo, WSJ religiously. You can tell that they're not nothing by how much effort both sides put into "working the refs." And a recent event, closer to home, was another indicator -- look how much chatter there was over Ross Douthat's appointment. Apparently, you are immune to these people. But I think it's a mistake to underestimate their clout.

I've been deliberately posting fewer comments to avoid becoming too influential and run the risk of selling out. Be careful, Brendan!

Quoting Namazu: I've been deliberately posting fewer comments to avoid becoming too influential and run the risk of selling out. Be careful, Brendan!

Yes, your recent quiet is alarming. ;^)

Great hair-splitting dialogue---no irony intended. I will probably have to listen to it again to make sure I understood everything. It was refreshing to hear an economist express scepticism about some of the postulates economists use in constructing their models, and to admit that they may leave too much out of the picture to be true to reality or even of much use in practice. It has always seemed to me that the postulate of the rational egotist or pleasure-maximizer, which lies at the root of economics, is pure science fiction.

Quoting Francoamerican: Great hair-splitting dialogue---no irony intended. I will probably have to listen to it again to make sure I understood everything. It was refreshing to hear an economist express scepticism about some of the postulates economists use in constructing their models, and to admit that they may leave too much out of the picture to be true to reality or even of much use in practice. It has always seemed to me that the postulate of the rational egotist or pleasure-maximizer, which lies at the root of economics, is pure science fiction.

"pure science fiction"? That's not skepticism, that's outright denial. Do you work for free?

Quoting Francoamerican: Great hair-splitting dialogue---no irony intended. I will probably have to listen to it again to make sure I understood everything. It was refreshing to hear an economist express scepticism about some of the postulates economists use in constructing their models, and to admit that they may leave too much out of the picture to be true to reality or even of much use in practice. It has always seemed to me that the postulate of the rational egotist or pleasure-maximizer, which lies at the root of economics, is pure science fiction.

It's true. Cosma Shalizi:

English-speaking social science, especially economics, is dominated by a tradition going back to Adam Smith and the other late 18th- and early 19th-century British political economists and historians of civil society. It focuses on individuals, and sees their acts and choices as primary. Larger entities — markets, states, institutions, cultures, and classes — are shorthand ways of speaking about patterns in the acts of many individuals.

Partly because they lend themselves to precise, mathematical expression, individualist theories have proven theoretically insightful, practically useful, and surprisingly powerful. They are also basically unrealistic. The standard individual economic agent, Homo economicus, has been called a "hedonistic sociopath." He also has no

Very interesting. Thanks for the link. I have read of similar experiments, or perhaps the same experiments. I think it is unfair to blame Adam Smith for letting loose on the world the unlovely caricature of homo economicus. He was the author of The Theory of the Moral Sentiments before becoming the author of the Wealth of Nations, and in his own mind at least the two works were meant to be complementary, parts of a grand synthetic "system" of social science (although he didn't use this term). Few people today even read the former work, which is really too bad. It is one of the truly great masterpieces of moral philosophy. There is a passage in it relevant to the article by Cosma Shalizi. Smith's whole argument turns on the role of "sympathy" in forming moral judgments, on how we adopt (sympathize with) the point of view of an "impartial spectator" that enables us to judge the behavior of others as well as our own: " ...in the race for wealth and honours and preferments, (the individual) may run as hard as he can, and strain every nerve and every muscle, in order to

Quoting Unit: "pure science fiction"? That's not skepticism, that's outright denial. Do you work for free?

A fiction it is when it abstracts from the whole of reality. See my reply to Claymisher.

Anybody else a fan of the now defunct series?

Quoting Francoamerican: Very interesting. Thanks for the link. I have read of similar experiments, or perhaps the same experiments.

I think it is unfair to blame Adam Smith for letting loose on the world the unlovely caricature of homo economicus. He was the author of The Theory of the Moral Sentiments before becoming the author of the Wealth of Nations, and in his own mind at least the two works were meant to be complementary, parts of a grand synthetic "system" of social science (although he didn't use this term). Few people today even read the former work, which is really too bad. It is one of the truly great masterpieces of moral philosophy. There is a passage in it relevant to the article by Cosma Shalizi. Smith's whole argument turns on the role of "sympathy" in forming moral judgments, on how we adopt (sympathize with) the point of view of an "impartial spectator" that enables us to judge the behavior of others as well as our own:

" ...in the race for wealth and honours and preferments, (the individual) may run as hard as he can, and strain every nerve and every muscle, in order to

Quoting Francoamerican: A fiction it is when it abstracts from the whole of reality. See my reply to Claymisher.

I'm sure the money isn't the sole factor, either for FA or for FA's employer. Real humans, not cyborgs, also care about status, fairness, respect, dignity, etc. Often people will learn a little about economics and decide that the market values are right and the human values are wrong (There were a few years when I resented having to buy people presents when I knew cash would be more efficient, but thank god that wore off). It turns out that a lot of people hate market values, and arrange their life to minimize the amount of haggling at the souq they have to do. Remember, market economies didn't exist at all until a few thousand years ago. They may be efficient, but they're definitely not human. You'll see people trying to shoehorn human values in to market models, like these guys talking about reading fiction as being some kind of signaling mechanism. That's just cyborg talk.

Quoting Unit: Well said Franco. Yes Adam Smith is more complex than slogans such as "the invisible hand" might indicate. Let me add a few more caveat to Clay's post.
It is not so clear that methodological individualism lends itself so easily to the mathematization of economics. After all once you start tracing the links and relations among millions of individuals (even if hyper-rational max-U types) the complexity becomes quickly so staggering that mathematical equations lose much of their usefulness in describing reality. I also reject the pseudo-scientism that induces people to rely on mathematical equations in economics, but I see this as a departure from the Smithian approach rather than a direct consequence. Let me also add that not only is the web of interactions highly interconnected, but also that the 'macro' phenomena that economics studies are the 'unintended' results of certain kinds of repeated interactions between individuals. Therefore the basic assumption about the individual agents are not so important: what they believe, what they think they're reacting to, what they think their goals are, are not as important (from an econ perspective) as the unintended orders that their actions create.

I think we're

Quoting claymisher: I think we're all in agreement here, except maybe for the last part about being able to assume away what people think. I'm pretty sure animal spirits have consequences.

I'm not assuming away what people think, I'm saying that one must evaluate the consequences of people's actions and how 'the way people think' produces those actions and those consequences, but I'm open to the possibility that the consequences under exam are not the intended ones by the agents themselves. Animal spirits don't make much sense to me and I don't see how they relate to macro phenomena. Maybe you can enlighten me.

Quoting claymisher: It's true. Cosma Shalizi:

I'm always happy to encounter someone else who reads Cosma Shalizi. And from another of your posts, thanks also for a new-to-me word: souq.

Quoting bjkeefe: I'm always happy to encounter someone else who reads Cosma Shalizi.

And from another of your posts, thanks also for a new-to-me word: souq.

Isn't Cosma Shalizi the best?! The guy is a genius! If I was a little younger I'd pack up and move to Pittsburgh to study under him.

Best television show of all time, with The Sopranos a close second. The Wire does a great job of portraying how institutional incentives affect individual behavior, while The Sopranos does a great job of showing how individuals' reasons for their actions can be opaque to themselves while clearer to others.

I only saw season 3 but I thought it was pretty amazing. I'm on holiday from tv for a bit to try and concentrate on writing, but when I return, The Wire is on my list of series's to watch from beginning to end. Rome was pretty amazing too! Other favorites of mine, for other reasons:
Picket Fences
Twin Peaks
Connections
Cosmos

Quoting Unit: Let me also add that not only is the web of interactions highly interconnected, but also that the 'macro' phenomena that economics studies are the 'unintended' results of certain kinds of repeated interactions between individuals. Therefore the basic assumption about the individual agents are not so important: what they believe, what they think they're reacting to, what they think their goals are, are not as important (from an econ perspective) as the unintended orders that their actions create.

I agree that the idea of the unintended consequences of self-interested actions (order arising out of disorder) is essential to economics as a social science. Hayek traces it back to Mandeville's Fable of the Bees (an author whom Smith both pillaged and abhorred): Private Vices, Public Benefits. Smith, however, clearly believed that the motives for moral virtue (justice + beneficence) are independent of economic self-interest, and indeed often in conflict with it. Sympathy binds us to society as much as our economic self-interest alienates us from it. Without the capacity to assume through sympathy with others the position of the impartial, disinterested spectator of our own motives and actions, neither our motives nor our actions would allow

Quoting Francoamerican: I agree that the idea of the unintended consequences of self-interested actions (order arising out of disorder) is essential to economics as a social science. Hayek traces it back to Mandeville's Fable of the Bees (an author whom Smith both pillaged and abhorred): Private Vices, Public Benefits.

Smith, however, clearly believed that the motives for moral virtue (justice + beneficence) are independent of economic self-interest, and indeed often in conflict with it. Sympathy binds us to society as much as our economic self-interest alienates us from it. Without the capacity to assume through sympathy with others the position of the impartial, disinterested spectator of our own motives and actions, neither our motives nor our actions would allow us to live with others. We would be monsters of egotism....

Beautifully said. I agree completely.

this was an excellent conversation. these two gentlemen have sharp rapiers.