Schoonmaker and Economics (long)

[gergery]

I find it kind of amusing that an article railing against oversimplification is itself grossly oversimplified.

There are principle in each of these areas which are almost by definition true:

--As price goes up fewer people will want something.
--When you have the best of it you want more money in the pot
--Rest will help you if you are sick
--Understanding your best alternative will help you negotiate more effectively

Then there are specifics to each situation which are completely situationally dependent. But even then there are almost always applications of the principles that make one decision path more correct than another. And understanding the principles enables you to understand when they don't apply.

--sometimes higher prices make things more valued as when they're proxies for value in luxury goods like perfume.
--sometimes you don't want more money in if you can't handle the variance
--sometimes light exercise is better than rest


So I don't really agree with a bunch of the examples in the article.

--Greg

[Kim Lee]

The article had three examples of oversimplification. The first involved a book on the pschology of business negotiation, something an industrial psychologist would understand. But the last two examples were badly wrong.

The article distorted the Chicken Soup series, writing "some people have killed themselves by eating chicken soup". Puhleeze. The Chicken Soup series is a collection of anecdotes and aphorisms to make you feel better ... kind of like Chicken Soup. They do not advocate Chicken Soup for medical use. Besides, how many people have really died from eating Chicken Soup?

The article also said economists assume people's primary motive is to maximize their profits. Wrong. Economists assume businesses maximize profits; people maximize utility. You can learn this in introductory economics texts. What is galling is the cavalier criticism of economic progress. How does it compare to the progress of psychology in say, psychotherapy, Mr. Ph.D.?

Basically Alan was too lazy to read stuff he criticized. Ironically the article illustrates it's premise of the dangers of oversimplification. He tried to come up with some examples but didn't do his homework.

[Exsubmariner]

I have been reading this discussion and find it intensly fascinating. I believe the way to express how I view the topics is to say that I need to understand the economics of the table before I sit down in a game (a broad view), but when I play a hand against an opponent I need to understand the psychology involved to make an optimal play (a very narrow view). Just as economics attempts to predict behaviours of large groups of people in an economy, psychology models individual behaviour. I think they are mutually exclusive, but share some basics. You need to be able to grasp both if you want to play good poker, run a business well, or invest. The key, I think, is recognizing a situational factor that makes the general rules nonapplicable or alters them slightly.
I am reminded somehow of Asimov's conception of Psychohistory.

[BarronVangorToth]

I'm hoping the March edition (due soon?) will have part 3...

This has been a fascinating thread, especially for those of us far less versed on the subject than others.

Barron Vangor Toth
www.BarronVangorToth.com

[Al Schoonmaker]

I most definitely did not state that eating chicken soup kills people. It is relying on it or any other all purpose cure that prevents them from getting prompt, appropriate health that kills them.

Ask any internist how many of his patients have failed to get prompt treatment because they were taking some all purpose cure. You will be shocked by their answers.

With many illnesses the major issue is time. For example, most forms of cancer can be treated successfully if you start soon enough. Wait too long, and you're dead no matter what treatment you get.

Businesses most definitely do NOT try to maximize profits. In addition, it is absurd to separate people from businesses. All business decisions are made by people, and they most definitely do not try to maximize their profits. Herbert Simon won the Nobel Prize in Economics for destroying that myth.

Although I disagree with you, I'm glad you contributed to the ongoing debate.

Regards,

Al