This time Russ Roberts really nails it, in my personal books, by managing to find an economist who holds a degree in electrical engineering. I hold electrical engineering, or at least an electrical engineer, close to my heart and always appreciate their ability to find error wherever it lurks, even if it lurks in the apple of their eye. But here these two economists find error in their own ways and in so doing return to good old Adam Smith, to his much neglected Moral Sentiments. The error lies in expecting two person interactions to be the same as larger group interactions, and not being able to measure trust and goodwill which mess up the maximum utility equations. Well, they explain it much better than I could, and really I was mostly excited because they mentioned Jeremy Bentham, a figure who figured quite prominently in my childhood but then appeared not to have taken the world by storm, despite having been stuffed upon death so he could continue to attend meetings of the Royal Society. They had to give him a wax head after his own head decayed in a macabre fashion due to poor mummying techniques:
Be that as it may, here is the inimitable Russ Roberts helping to explain why economists are getting it wrong:
Vernon Smith on Adam Smith and the Human Enterprise
Nobel Laureate Vernon L. Smith of Chapman University talks to EconTalk host Russ Roberts about how Adam Smith’s book, The Theory of Moral Sentiments has enriched his understanding of human behavior. He contrasts Adam Smith’s vision in Sentiments with the traditional neoclassical models of choice and applies Smith’s insights to explain unexpected experimental results from the laboratory.
Jim Cramer. Love him or hate him, this tribute to his Dad, who just passed away, was awesome. I cried. 😥
http://finance.yahoo.com/video/cramer-pays-tribute-pop-ken-231500149.html