Category Archives: World
One thing I as an economics student get asked most is: why do economists think people are rational? Surely people don’t do calculations or complicated logical reasoning before they act?
On the second question, I completely agree because I don’t have a lovely formula in my head that tells me what to eat for lunch, what shampoo I buy or any other hundreds of minute or significant decisions I make everyday. But what I do have is an idea of what I like: I’m vegetarian so meat is off the table for lunch, I hate the smell of mint so I’ll never go for a shampoo has herb in it, and so on. This is what we students of economics know as preference. Rationality in the economic sense, really is just about preferences.
Continuing with my lunch and shampoo, if I did eat say beef for lunch or I actually bought a shampoo with basil fragrance, then without any new information, I’m the classic definition of irrationality according to economics. So what exactly is rationality then? In simple words, rationality means the following:
- The ability to make a decision
- The ability to identify one’s preference that makes sense
- The ability to make a decision based on the preference identified.
So you see, really there’s no calculations of any sort, and by making sense in 2), I meant if you prefer apples to oranges to bananas under all circumstances, then when present with an apple and a banana, you will always get an apple.
Then you say, what about these utils or whatever your professor calls it? Isn’t that what we get from plugging numbers into these “utility functions”? In a way, yes and in many other ways, no. I think it is obvious that we can’t measure satisfaction with numbers and dollars. Who is to say one’s pleasure from eating an apple is $5 more than the pleasure from eating a banana? Utility functions are a way to represent preferences. Thanks to mathematics, if you can give me your preference over fruits, I can write “taunting” maths expressions to represent what you like.
Looking back at apples and bananas, if you are a huge fan of apples (as in fruits) and can never get enough of it, then I could write something like u(x)=2x where x is the number of apples you have. And this is saying nothing more than: the more apple you have, the better you feel. In this case, u(x)=2x is saying EXACTLY the same thing as u(x)=100x unless you want to offer me some more information.
On a last note about this rationality business, these functions don’t exist in my or your or anyone’s mind. It’s is a way economists use maths and numbers to build a model and hope to understand decisions and behaviours. Think about those horrifying “utility functions” you maximised or saw your friends maximised, the intuition behind can be really simple. So don’t be afraid the next time you say someone is rational or say yourself is rational. You are not a walking calculating machine or a sophisticated logician (neither is a bad thing in anyway), you are just a normal person as anyone else who knows what she wants and acts like it.
I was browsing random pages and chatting with random friends earlier on, and two terms grasped my attention: futurology and prediction market.
Futurology is pretty self-explanatory: study of the future. It was a hot topic many many years ago, but not so much right now. Anybody who says he or she is a futurologist or futurist is possibly nobody. Why is that you ask, don’t all scientists and social scientists predict the future? Well, a futurist is not someone who predicts the future, it’s someone who does nothing except predicting the future. Huge difference.
And we don’t fancy those predictions as much as our parents or grandparents did in the golden age of futurology–in 1960s and 1970s. Prophecies back then were based on things that significantly changed people’s life and well understood by most people–such as electricity and telephone. But right now, the huge assumption is that our path is determined by things like nanotechnology, computer engineering and genetic engineering, things that most of us don’t understand. We are way beyond the realm of common wisdom and all senses of directions blurred–so there’s really nothing much left to be utilised or contradicted.
A few years back The Economist had an article outlining some rules for futurists: think small, think short-term, admit uncertainty and get a real job. So if you are employed and saying “I’m not sure what is going to happen to me tomorrow”, then well, you are a wise futurist. Congratulations! Forgive my sarcasm, but predicting the future is something even the time lords can’t master and they get the TARDIS while all we have is less than a time travelling wristband.
However, something related to futurology did prosper over the past couple of decades: prediction markets. As the name suggests, they are markets that trade predictions, or more accurately, bet on the future. You can enter the game by betting on a possible or probably outcome of some events: like the result of an election, capture of a known terrorist, or nuclear proliferation. The companies that run these prediction markets then gather all the betting data and based on the value people placed on certain outcomes, give a prediction with probability attached. Some interesting numbers are: Osama bin Laden being caught by 2007–15%; Obama winning the election–75%.
No doubt these markets raise lots of controversies and have been interests of lots of researchers in the field of public policy, economics and political science. What if the prediction markets on the passing of a political leader turn into assassination markets? Prediction of election outcomes into election fraud? Yet many corporations use these markets to direct their strategic planning and marketing campaigns quite successfully.
The good news for us is, most of the prediction markets in operation do not use real money: winners get some sort of reward and losers don’t lose anything (except some ego). So I’ve heard that there’s a bet on immortality and the possible demise of mankind. I will bet if I can just figure out how I can collect if I win.
Originally posted on Terry Blog
I am from reading poetry and novles
watching clips from Broadway and Westned
from all the memories I have kept
and those that were lost
From endless wheat field and running horses
blue oceans and white beaches
From wiggling tails and paws
bright rainbow and yummy biscuits
I am from seeing Dad designing homes
Mum cooking my favourite stew
From the laughters and tears in school
ups and downs before my dream came true
The similarities bring us together
The differences make us stronger
That is my life
and it is always true
Been in Vancouver for about two years now and have about one more year to go. The question I’ve got most is: are you staying in Vancouver? And truth be told, probably not. (If you understand euphemim, you know what I mean…)
Vancouver is a great city to be sure, with lots of merits of a metropolis and of suburban town at the same time, but weighing the cost and benefits of living here (I’m such an economist ^^), I’ve got to say it’s time to move on.
- Huge variety of food of huge portions and respectable quality and price. YUM!
- Spectacular natural scenery: mountains, beaches, forests convey such beauty that words cannot describe.
- Mild climate: never too cold nor too hot.
- UBC is indeed great: my friends and professors are some of the nicest people I’ve ever met.
- Housing price is way higher than most of Canada (I’d say higher than anywhere else in Canada but might not be true)
- By the time new products reach Vancouver, it’s almost outdated in other countries, say its good neighbour US.
- The rain never seems to stop: weather forecasting is like the worst fortune telling there is. Just carry an umbrella and forget about weather network.
- Theatres in Vancouver were rarely great. Some of them are reasonably good, but I don’t remember being wowed at the end of the performance. (With some consolation, didn’t cost that much to go to theatre).
- Construction seems to go on forever. A mere ten minutes bus ride from UBC to my house sees three major construction/roadwork sites.
- Train tickets cost a fortune to go pretty much anywhere.
I know I’m probably seriously biased against Vancouver for I know now that this is not the city I’d want to spend the next five or years of my life in. It’s more suitable for people seeking a quite, slow-paced life, not for me looking for something more than Canuck’s game and all-year-round skiing.
So hopefully, I’ll say goodbye to Vancouver with lots of hugs and smiles, then move on to the next city, whatever or whichever that might be.