Three scientists are shipwrecked on a tropical island with nothing but the clothes on their back and a case of canned beans. On day 1 the first scientist, a physicist, suggests that they find a really large rock and smash the can. The beans will pop out and they can eat. After repeated attempts they end up with a smashed can and a little juice dripping from small holes. On day 2 the second scientist, a chemist, suggests that salt water is corrosive, so if they set a can in the ocean water it will corrode the can and they can get to the beans. After 3 days of waiting with no beans and not even the smattering of juice, the very hungry third scientist, an economist, suggests that it’s his turn. His solution? “Assume a can opener!”
The always interesting and usually rational Craig Newmark suggests amateur’s shouldn’t apply economic reasoning based on this article.
Economics: don’t try it at home without consulting a professional.
The better conclusion might be “Take some economic reasoning with your math.” Peterson didn’t claim, from what I saw, to be applying ecnomic reasoning. He was writing about statistics and probability under the title “Math Trek: Going with the Crowd.”
Aside from the fact that he was writing about math and not really attempting to apply economic reasoning which might have helped, you know since he would have said ‘ceteris paribus’ if he were an economist and that would have made it all good, there are a couple of other problems with the Newmark conclusion.
- His basic point, aside from a demonstration of probability theory and a nifty Java applet, was that trendy doesn’t equal quality. Well, duh! It doesn’t take a professional economist or a professional statistician to know that. There are a host of reasons that a place may be trendy and quality is probably middle of the list.
Based on his assumptions his outcome was correct. My econ professors, the good ones anyway, pointed out that the assumptions are very important. The difference is that professional economists faulty assumptions can result in disastrous public policy while the assumption in this case might at worst result in your considering the restaurant with the shorter line. (And in Peterson’s case their “meals were delicious” when they did.) Think professional economists don’t make some doozies of faulty assumptions? How about the Keynesian assumption that the (negative) multiplier for taxes is lower than the multiplier for spending, so raising taxes and spending equally will accelerate economic growth? Pardon me, but I’ll take an amateur Austrian over a professional Keynesian anyday.
Canada’s Econoclast takes on the same article, reaching similar conclusions, but he did note that it was a “rather dumb (oops — incomplete) model,” which is actually the only real issue. The problem isn’t the statistics or even, necessarily, the conclusion (trendy does not equal quality) but rather that the assumptions were so limiting. But again, professional economists certainly don’t have a monopoly on perfect assumptions and noneconomists don’t have a monopoly on silly ones.
Gotta sign this post,
Professional Real Estate Agent
Amateur Economist (Assume your house sells!)