Well, jks has already made a pretty reasonable response, but I'll add a bit, although I shall not follow up as my experience is that if someone denounces all of econ as "drivel" with a silly argument, they are not about to be convinced of the contrary by anything that anybody else says, especially somebody advertising themself to be a "technical economist" (and I am, very much so).
Anyway, to be more specific, Bill, I was summarizing a huge array of studies, initially from surveys, then from experiments, and now from carefully studied real world cases. Each of these was very specific and in a specific context, so it would take hundreds of pages to describe all of them for you with their particular contexts, etc. blah blah. But their volume is now overwhelming and the results are now incontrovertible, although the exact ratio depends on details, circumstances, etc. I gave this list a kind of ball park typical figure, and indeed it was studying environmental issues where this was first observed, although it has now been studied to death in many other contexts.
I think Carrol Cox's example about his inherited piano is a very good example.
Just to pin it down. Standard economic theory would predict that in the 10% example I gave, the gap would be about 30%, we would expect people to demand more for losing something than they would be willing to pay for more of it, but not very much more. But the gap is more like 300% on average. In fact, a bird in hand is worth more like THREE in the bush, on average, if not more.
There is something very important going on here, and it is partly why I have bothered responding to your initial point. There is a big struggle going on within economics right now over whether or not it will be scientific, in particular, will economists accept that they must face and deal with stylized facts about how people behave and who they are rather than impose their old theories of "rational" behavior on them and say that this is how they behave irrespective of any and all evidence. For better or worse, the behavioral and experimental economists who insist on economists dealing with real facts and data are gaining ground and respectability. The last Nobel Prize in economics was shared by a psychologist, Daniel Kahneman, and an economist, Vernon Smith, who both advocate such a view, with Smith widely considered to be the "father of experimental economics."
As Paul Davidson used to say, "have a nice day (mate)!" Barkley Rosser ----- Original Message ----- From: "Bill Bartlett" <billbartlett at enterprize.net.au> To: <lbo-talk at lbo-talk.org> Sent: Tuesday, June 10, 2003 12:35 AM Subject: Re: [lbo-talk] Economics drivel
> At 6:23 PM -0400 9/6/03, Barkley Rosser wrote:
>
> > I hate to start sounding like a technical economist,
> >but indeed, "a bird in hand is worth two in the bush,"
> >is not opportunity cost at all, but what is now coming
> >to be called the "endowment effect," which itself is a
> >discovery of the behavioral economists that goes against
> >the grain of standard neoclassical economists. If you
> >have something you really do not want to give it up, but
> >if you don't have it, then it is not such a big deal. This
> >was discovered in contingent valuation studies of the
> >environment. People will demand to be paid much more
> >for a 10% decline in enviro quality than they are willing to
> >pay for a 10% increase in enviro quality.
>
> See, there you go. It is getting way ahead of yourself to measure such a
thing and you make no attempt to explain it or put it into any social
context. No attempt whatsoever to understand why something happens.
>
> > An average of
> >the by now voluminous studies would suggest that the
> >ratio is likely to be about 3 to 1, although some have it as
> >high as 10 to 1, easily. This violates standard economic
> >theory, although not most peoples' common sense.
>
> You're trying to measure something before you know what it is. How futile
is that? You can't see the wood for the trees.
>
> Bill Bartlett
> Bracknell Tas
> ___________________________________
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>