Re:The Ergodicity Problem in Economics
by photojosh on Wednesday December 04, 2019 @06:37PM
(#21708360)
I've been following the author for a while now (no personal connection), and I'm taken with the ideas. Mainly because it's never seemed right to me that economics' "rational person" doesn't resemble anyone in the real world.
[0] also out today explains it starting from a concrete example:
> the coin toss game seems worth playing because equal probability of a 50% gain and a 40% loss are no different from a 5% gain.*
> Why people don't choose to play the game, seemingly ignoring the opportunity to gain a steady 5%, has been explained psychologically-- people, in the parlance of the field, are "risk averse". But according to Peters, these explanations don't really get to the root of the problem, which is that the classical "solution" lacks a fundamental understanding of the individual's unique trajectory over time.
[0] also out today explains it starting from a concrete example:
> the coin toss game seems worth playing because equal probability of a 50% gain and a 40% loss are no different from a 5% gain.*
> Why people don't choose to play the game, seemingly ignoring the opportunity to gain a steady 5%, has been explained psychologically-- people, in the parlance of the field, are "risk averse". But according to Peters, these explanations don't really get to the root of the problem, which is that the classical "solution" lacks a fundamental understanding of the individual's unique trajectory over time.
You can also get his full lecture notes at [1].
[0] https://www.santafe.edu/news-center/news/fix-economic-theory...
[1] https://ergodicityeconomics.com/lecture-notes/