"We live only by knowing something about the future; while the problems of life, or of conduct at least, arise from the fact that we know so little."
Frank H. Knight

Anonymous: do a shirtless pic for real? do you work out? what's your height/weight? ever browse /fit/? Excsuse the question bombing i just want to be your workout (read: sex) buddy

1) I feel tired all day without exercising; 2) 6 feet, about 160 lbs. I’m skinny without being muscular; 3) No don’t really go on 4chan in general, my attention span is too short.

Property rights mean that (1) if I plant corn, I have the right to harvest the yield of that corn, and therefore the right to prevent passersby from harvesting it; and (2) if I save some of the income from the sale of that harvest and invest in more land, then I have the right to plant and harvest from the additional land. To be “propertied” is to have the right to accumulate. To accumulate is not to consume all that my labor and previous savings investment has produced. This allows all my accumulation to remain at work in society at large and for all others to benefit from my capital investment. This is the basis for all endogenously sustainable (that is, devoid of perpetual external transfers) net wealth accumulation in society. There can be no other basis. If there is any abridgment of an individual’s rights to so harvest and accumulate, then there is a direct abridgment of the rights of all others to share in these external benefits and achieve a corresponding improvement in their welfare – benefits unintended by the investor-saver who seeks only his own security.

– Vernon Smith, Rationality in Economics (via laliberty)

hongkongstockexchange: how are you doing on those western philosopher asks?

The Hong Kong Stock Exchange is regulated by the state thereby proving that Hong Kong is not a free market read Infoshop.

The outstanding fact is that the ubiquitous presence of uncertainty permeating every relation of life has brought it about that information is one of the principal commodities that the economic organization is engaged in supplying. From this point of view it is not material whether the “information” is false or true, or whether it is merely hypnotic suggestion. As in all other spheres of competitive economic activity, the consumer is the final judge. If people are willing to pay for “Sunny Jim” poetry and “It Floats” when they buy cereals and soap, then these wares are economic goods. If a certain name on a fountain pen or safety razor enables it to sell at a fifty per cent higher price than the same article would otherwise fetch, then the name represents one third of the economic utility in the article, and is economically no different from its color or design or the quality of the point or cutting edge, or any other quality which makes it useful or appealing. The morally fastidious (and naïve) may protest that there is a distinction between “real” and “nominal” utilities; but they will find it very dangerous to their optimism to attempt to follow the distinction very far. On scrutiny it will be found that most of the things we spend our incomes for and agonize over, and notably practically all the higher “spiritual” values, gravitate swiftly into the second class.

– Frank H. Knight, Risk, Uncertainty and Profit (III.VIII.44)

Eureka! Economic Illiteracy as Mental Substitution - Bryan Caplan

Here’s another revelation from Kahneman’s Thinking, Fast and Slow, from his chapter on “Answering an Easier Question.”  The lead-in:

A remarkable aspect of your mental life is that you are rarely stumped.  True, you occasionally face a question such as 17 × 24 = ? to which no answer comes immediately to mind, but these dumbfounded moments are rare. The normal state of your mind is that you have intuitive feelings and opinions about almost everything that comes your way. You like or dislike people long before you know much about them; you trust or distrust strangers without knowing why; you feel that an enterprise is bound to succeed without analyzing it…

His next step:

I propose a simple account of how we generate intuitive opinions on complex matters. If a satisfactory answer to a hard question is not found quickly, System 1 will find a related question that is easier and will answer it. I call the operation of answering one question in place of another substitution


Consider the questions listed in the left-hand column of table 1. These are difficult questions, and before you can produce a reasoned answer to any of them you must deal with other difficult issues. What is the meaning of happiness? What are the likely political developments in the next six months? What are the standard sentences for other financial crimes? How strong is the competition that the candidate faces? What other environmental or other causes should be considered? Dealing with these questions seriously is completely impractical. But you are not limited to perfectly reasoned answers to questions. There is a heuristic alternative to careful reasoning, which sometimes works fairly well and sometimes leads to serious errors

[Kahneman’s Table 1]

Kahneman continues:

The mental shotgun makes it easy to generate quick answers to difficult questions without imposing much hard work on your lazy System 2. The right-hand counterpart of each of the left-hand questions is very likely to be evoked and very easily answered. Your feelings about dolphins and financial crooks, your current mood, your impressions of the political skill of the primary candidate, or the current standing of the president will readily come to mind. The heuristic questions provide an off-the-shelf answer to each of the difficult target questions.

I had a eureka moment when I read this passage. Consider the economic illiteracy intro econ professors face behind every corner.  How do students manage to combine such absurdity with such certainty?  Via substitution.  Faced with a genuinely difficult question, they answer a different, easier question, then conflate the answer to their question with the answer to your question.  Like so:

[My Table 1’]

Needless to say, economists could argue at length about which substitutions students make when we confront them with challenging questions.  Better yet, we could try to empirically - even experimentally - triangulate their substitutions.  Whatever the specifics, though, substitution is a plausible explanation of not only the absurdity of many popular views about how the economy works, but people’s certainty about these absurdities.  

P.S. Have you ever read a more elegant account of “heuristics” than this?

The target question is the assessment you intend to produce.

The heuristic question is the simpler question that you answer instead.

The technical definition of heuristic is a simple procedure that helps find adequate, though often imperfect, answers to difficult questions. The word comes from the same root as eureka