The Myth Of Irrationality In Economics

[crumbcake]

In theory, if you knew the exact position and velocity and direction of every micro-particle in the universe you would be able to predict everything that would ever occur from there on out. But that would take a lot of ASICs to do the calculations.

https://en.wikipedia.org/wiki/Uncertainty_principle

Uncertainty at the quantum level is just because there is not enough knowledge yet to explain everything. Not that I am saying there will eventually be that knowledge, but there is likely an explanation behind it beyond our current understanding.

Just like how the rain gods produced rain. It was uncertain exactly which ritual most pleased them.

Actually, this is nothing like that.  It's not instantly intuitive, most pop physics explanations are so bad they're misleading, and trying to understand the underlying math doesn't seem like too much fun (just looked at the wikip page).  Even Schrodinger's Cat, something that's meant to be easy to grasp, is misunderstood & misrepresented by many *writers*.  But it's fun, the only short hint i can give is "if after you get it, it seems 'blah,' the explanation is wrong, or you didn't get it."  Something like that. 

[myrkul]

In theory, if you knew the exact position and velocity and direction of every micro-particle in the universe you would be able to predict everything that would ever occur from there on out. But that would take a lot of ASICs to do the calculations.

https://en.wikipedia.org/wiki/Uncertainty_principle

Uncertainty at the quantum level is just because there is not enough knowledge yet to explain everything.

And it's physically impossible to collect all that data.

[Schleicher]

Uncertainty at the quantum level is just because there is not enough knowledge yet to explain everything.

It's not quite clear yet if this is true or not.
http://en.wikipedia.org/wiki/Hidden_variable_theory#Recent_developments

[kodo]

very interesting thread, thanks.

[freedomno1]

Irrational behavior obviously exists, and if those decisions are economical, well you get irrational economics.
Welcome to the world of Behavioral Economics, a whole interdisciplinary field dedicated to the research of irrational economic decisions.

The very definition of classical economics is that all decisions are rational. This is more a dogma than a law.
The main argument is that all markets act efficiently as an aggregate, individuals doing dumb stuff doesn't affect to the market as a whole. But that is further from the truth, the market failed several times in history, and had enough bubbles to call them rational at all.

I agree with this quote
Economics has too many variables rationality is more less an average
Patterns can be seen but are not exclusive
Human action is not robotic hence markets are volatile and requires the evaluation of human nature to determine rationality

[bitsalame]

I am still impressed that people jump from human behavior, a domain that belongs to psychology and economics, to fields that are way way way off tangent such as quantum physics.
Look, quantum physics has a freaking loooooooooong way to even be compatible with general relativity, and we are talking about an endless debate within one single discipline: physics.

From there to extrapolate all the way to psychology, lets say that it is quite a stretch of relativistic scales.
Please lets stay within the relevant field of study please.
The relevant one is neither psychology nor economics, but multidisciplinary field that is a combination of both: behavioral economics.
That's where the irrational economics are specifically studied. If you guys are interested find about Dan Ariely.

Here is a clip in Ted Talks that might interest you guys: http://www.ted.com/talks/dan_ariely_asks_are_we_in_control_of_our_own_decisions.html

And one more thing, I would appreciate if you guys stop using the word "theory" so lightly.
If you are thinking "what if", that is imagining/conjecturing, not theorizing.
If you are thinking "I think that..." that is just giving an opinion, not theorizing.
If you are thinking "I think that..." AND have a way to test it out, then you have an hypothesis. Still not a theory.

The truth is, in your normal common life, you will never be making theories.
Most of the times if you think "In theory" you are most of the cases extrapolating or conjecturing from common sense or common knowledge.
Please don't do that.

Theories in science are the closest things to truths.
Saying "Theory" in science it is the same equivalent as saying rigorous Scientific Knowledge that has been tested and retested to be robust enough to be considered confirmed (as long as every new experimentation is in line with the predictions of the theory, not only keeps it alive but strengthens it).

Anyways, sorry for this, but I just had to say it.
It is my pet peeve to see people using the word theory so freely.

[Jobe7]

People act completely rational in accordance with their beliefs.

True story.