Like, you know...?

We often take language for granted. Sharing a building with the Linguistics Department here and the occasional awkward lost in translation moment has made me appreciate the importance of communication to society. Grown-up economists have considered it too: Ariel Rubinstein has a book entitled 'Language and Economics', which you can download for free from his rather unique website.

Bart Lipman is a theorist in Boston University. In 2002 he wrote a paper on language and economics which memorably opened with "I find myself in the rather awkward position of trying to survey a literature which (as I will feel compelled to define it) almost doesn't exist." He has continued the fine tradition with a 2009 working paper:

Why is language vague?

Barton L. Lipman

Department of Economics

Boston University

Current Draft: November 2009

Abstract: I don't know.

Funny abstract aside, the conclusion may strike a chord with this blog's readership:

"Put differently, the vastness of even very simple sets of options suggests it is ludicrous to think a real person would have well defined ideas, much less well behaved preferences ... In short, it is not that people have a precise view of the world but communicate it vaguely; instead, they have a vague view of the world."

(H/T: Jeff Smith)

Addendum: this Father Ted clip is apt.

VoX Interview with Robert Aumann

Fascinating short interview with 2005 Nobel winner Robert Aumann on rationality, games and conflict - link here. Interesting discussion of the work of Kahneman and Tversky contrasted with that of Vernon Smith.

Laurie Santos: A monkey economy as irrational as ours | Video on TED.com

Laurie Santos: A monkey economy as irrational as ours | Video on TED.com
Fascinating talk looking at financial behaviour by monkeys & how similar it is to humans (for example loss aversion).

Rationality Lecture 3

I am posting some brief summaries of some of the lectures for undergraduate behavioural economics to stimulate broader discussion. This lecture addressed the basic meaning of rationality in the areas of labour supply, intertemporal choice and saving outlining textbook undergraduate models in each of the domains. It further examined the basis of rational choice under conditions of risk, briefly outlining Von-Neumann Morgenstern utility functions, risk aversion and judgments of probability. Much of the course will examine how people make judgments of probability and frequency and use them to make decisions where actions have uncertain outcomes.

The lecture also briefly examined the connection between rationality and libertarianism. This is a very complex connection but one way of framing it is that rational individuals interacting in free markets are the best judge of their own welfare. A number of scholars argue for greater state intervention on the basis that individuals cannot implement fully rational decisions due to information processing and related constraints. On the other hand, a substantial volume of libertarian scholars argue that human rational choice is the best arbitrator of value and that state intervention, except in rare cases, restricts human freedom to maximise their own welfare based on their own standards. The tension between libertarian and paternalism and the role of rationality in this debate will be at the heart of the policy applications used in this course.

New Journal: Rationality, Markets and Morals

Via Dennis Dittrich, here is a link to an interesting new journal. 

Rationality, Markets and Morals (RMM) is an international journal addressing issues at the intersection of philosophy and economics. Contributors are expected to approach economic problems from a philosophical point of view, to apply economic methods to the investigation of philosophical problems, or to explore the common foundations of both disciplines (see Aims and Scope for more details). Volume 0, available now, presents paradigm examples of RMM’s topical and methodological scope. It is a festschrift in honour of one of the editors, Hartmut Kliemt, who was invited to join RMM on the occasion of the festschrift’s presentation.