Economics is a money pump

How does Academic Economics explain why Academic Economists- despite being utterly shite- nevertheless make a little money?

It's no good just inanely bleating the party line that the Credential they sell is a costly signal which is adversely selective of stupid little sycophants who actively want to advertise their willingness to do boring pointless shite and tell the stupidest possible lies with a straight face.

This begs the question- how does Academic Economics ensure it will always be worthless shite of an entirely sociopathic sort?

The answer is that its M.O involves turning a question of an interesting type - e.g. how could we get more for less?- into a boring and pointless one by introducing a stupid distinction without a difference which hinges upon a type of precision which the subject matter can't afford.

It then only remains to say 'before we can say anything which relates to something interesting or useful, we must first talk worthless shite which implies that all other economists hitherto were stupid sadists and that much much more research of a worthless type must be done before we can properly frame the question as to why economics is such utter shite.'

How can this be more economically said? One answer is provided by the title of this blog-post.

In simple terms, a money pump is a situation where someone will pay a little at each point in a round trip journey involving differentiated choice situations. In other words, you start by paying a bit to get what seems a slightly better deal over what you have and do so again and again till you find yourself paying to get back to your original position. Clearly, you may do this as part of 'discovery'. You tour the world to reassure yourself there's no place like home. This isn't a real 'money-pump'- it is you paying for experience and information and is 'regret minimizing'.

Alternatively, you could have made a series of errors coz of focusing bias. Consider Seinfeld who currently has the perfect g.f. Suddenly George starts gassing on about how height is the most important thing- all super-models are very tall. So Seinfeld dumps his perfect g.f for a tall airhead. This prompts Kramer to explain that smart girls are sexier. Why toilsomely ascend a frigid peak? So Seinfeld dumps the airhead for a bluestocking. But George is not happy coz she looks exactly like him. Once Seinfeld recognizes the true horror of the situation, he has to dump her. He'd now sacrifice anything- even his precious  Friar's Club blazer- to get back his original g.f. OMG! It was Elaine all along! Well, that's not happening so Seinfeld is back to trying to be the 'master of his domain' and failing miserably.

Related to focusing bias is incommensurability. After all, it is merely a manner of speaking to say one 'trades in' one thing for another. In reality, all things are unique and incomparable in their haecceity. We may seek to 'commodify' things- make them interchangeable- because otherwise the scandal of contingency or Knightian uncertainty is too great. Subjective probability- i.e. predicting the state of the world- becomes one's way of defending oneself against its overwhelming, ego-annihilating reality. But, the 'Dutch book' this reveals features a Parrando's game- a reverse money pump such that a sequence of losing bets makes one the winner. But for Seinfeld- an above average guy- the necessary existence of an abject loser who yet gets ahead of him, turns his peregrinations into the trajectory of that Schlemazel upon whom the Schlemiel spills soup. Not just any soup. It is that of the soup Nazi which gets him in trouble with Elaine which means he has to watch Rochelle! Rochelle! all by his lonesome.

Economics claims to be the science of choice under scarcity. However, what is scarce is information and computational power. Moreover, Uncertainty is never reducible to a probability distribution. Thus actual economics is nothing more than, one step at a time, finding ways to save on scarce resources or find a better use for them. Academic Economics pretends otherwise. It focuses on a particular probability distribution- as if that could represent states of the world- and this focusing is what creates a money pump between incommensurable- indeed incompossible- states of the world.

How does it do so? The answer is, for any interesting question that might be posed to it, it begins by making the stupidest and most boring distinction possible. It claims that if this distinction is kept in mind, something valuable will be gained. It then goes on to talk utter shite till every sensible person loses interest and goes home. However, there is an appearance of activity and though this is a money pump where the Economist keeps paying a premium in terms of 'rigor' or 'precision', so as to incorporate whatever the distinction he has made causes to become focal, but the end result is that he would prefer to be where he started off.

Consider the following fairly typical para from an Econ paper-

When thinking about the relation between preference and choice, it is worth distinguishing between the choices that are permissible given the agent's preferences, those that are mandatory and those that she actually makes.

We have preferences. We make choices. Do we find it worthwhile to make any such distinction? I like my eggs scrambled. But it is not mandatory that I only get scrambled eggs. It is permissible for me to have a hard boiled egg. The choice I actually make may be for porridge instead. As I eat it I realize I always hated porridge and it was omelettes that I truly prefer.

Eggs don't matter very much. However, stuff which matters a great deal- e.g. which surgeon operates on you or which barrister defends you on a capital charge- does not involve your preferences at all. Unless you choose to be a fool.

Making silly distinctions- like between permissible and mandatory and actual choices- leads one to become more, not less, ignorant of what is economia- that is harmonious or apt, and what is akrebia- i.e. dissonant by reason of applying greater precision than the subject matter warrants. Consider the following shite-

Rationality does not generally require that agents have strict preferences over all alternatives, so it is to be expected that these sets of choices will not coincide.

Rationality requires you not to talk nonsense unless you really have no other way to make a little money working a money pump.

Consider the next sentence.

For instance if she is indifferent between two alternatives or is unable to compare them it might be permissible for her to choose both alternatives facing her, not mandatory to pick either, while in fact choosing only one of them.

 Replace the clause in bold with any random shite you like and the truth value is the same.

For instance if the Nicaraguan horcrux of the neighbor's cat bites itself in the butt, it might be permissible for her to choose both alternatives facing her, not mandatory to pick either, while in fact choosing only one of them.

This is a case of either tautology or ex falso quodlibet depending on how you define permissibility.

There are two implications of this point.

There is no point here at all. No implications follow at all.

Firstly, preference-based explanations and/or rationalisations are necessarily limited in scope.

Nonsense! A psychological account of why I prefer a particular shade of green to all others may unlock all sorts of repressed memories and dispel all manner of cognitive biases or neurotic complexes. It may be that, as depicted on TV, there are expert psychologists who can tell just by knowing how one likes to take one's coffee, how one will vote on a Jury in some very complex type of case involving Corporate malfeasance.

The scope of Science is unlimited. Its Structural Causal Model for my preferences could also be used to cure me of obesity and make me a less horrible person.

Econ as money pump, on the other hand, is utterly useless. Indeed, it is harmful, because it is an approach which justifies certain types of Corporate malfeasance which may jeopardize my livelihood and impoverish my old age.

Invoking someone's preferences will suffice to explain why some choices were not made (i.e. in terms of rational impermissibility) but not typically why some particular choice was made.

Invoking the Nicaraguan horcrux of my neighbor's cat will suffice to explain why I don't chose to bite my own head off.  Like invoking preferences, the thing is meaningless. An insight into my psychology or into my financial situation or what is happening in the wider world, on the other hand, could be very meaningful.

To take up the slack, explanations must draw on factors other than preference: psychological ones such as the framing of the choice problem or the saliency of particular options, or sociological ones such as the existence of norms or conventions governing choices of the relevant kind.

There was no slack because there was no explanation. Psychology or Sociology or some other discipline might provide an explanation. Armchair Econ can do nothing save money pump in an ever decreasing circles.

Some work has been done on how to rationalise choice when it has more than one determinant (see, for instance, Baigent [2]), but in general it is an insufficiently studied problem. Secondly, observations of actual choices will only partially constrain preference attribution. For instance, that someone chooses a banana when an apple is available does not allow one to conclude that the choice of an apple was ruled out by her preferences, only that her preferences ruled the banana in.

One can't conclude this. She may have had a brain fart. Or else there is a Freudian explanation.

In this simple observation lies a serious obstacle to the ambition of Revealed Preference theory to give conditions on observed choices sufficient for the existence of a preference relation that rationalises them.

How can a mathematical description of something also explain it? You need a Structural Causal Model. That means getting out of your armchair and doing some actual research.

For the usual practice of inferring the completeness of the agent's preferences from the fact that she always makes a choice when required to is clearly illegitimate if more than one choice is permitted by her preferences.

Inferring something impossible is stoopid under all circumstances. Nobody always makes a choice when required to do so. This is because they fell asleep or died while these assholes were talking.

The upshot is that the usual focus on the case where an agent has complete preferences is quite unjustified.

No shit, Sherlock!

The aim of this note is therefore to explore the two opening questions without assuming completeness, building on the work of Sen [9], Richter [7] and especially the recent work of Bossert and Suzumura [4][5]. I argue that when incompleteness of preference is reasonable then rationality does not require full transitivity of preferences.

Transitivity means if a is above b and b is above c then a is above c. Preferences don't work that way. At the start of dinner, I prefer wine over cognac and meat over pudding. By the end the reverse is true. Most of the time, I prefer water to wine or cognac and a sweet to a hunk of meat.

In any case, Economists know that Preferences won't be transitive unless  nothing is habit forming or alters preferences by reason of being consumed. It also means novelty is never be prized for itself and that people never experiment. Further it assumes there are no mimetic effects, no Advertising or Marketing, nothing in fact which obtains in the real world.

More seriously, there is an evolutionary reason why it would be dangerous for us to have transitive preferences or even 'Suzumura consistent' ones. This is because 'money pumps' may be regret minimizing. Intransitivity allows us to guard against catastrophic risk. Furthermore, under Knightian uncertainty, transitive preferences are bound to be sub-opitmal because volatility is underestimated. This means 'voltatility pumping' or 'Parrando game' type strategies may pay better. The reverse is also true. Strategic intransitivity baffles a predator or parasite.

Armchair economics is a bad type of money pump created by focus bias. Actual economising, however, hits upon coevolved mechanisms which are cheaper ways of exploring the fitness landscape and finding local peaks. They also feature damming up capacity diversity to be released as required.