Kahneman’s Failed Revolution Against Economic Orthodoxy by Zeljka Buturovic & Slavisa Tasic

To download the article by Buturovic and Tasic (from Critical Review) click on the link below.


The original link to the article is here.


It is clear that in making real-world decisions people rely on various authorities—family members, media reports, experts such as school counselors, therapists, and real-estate agents; that they succumb to peer pressure or conform to childbearing, lifestyle, and other norms of their immediate environment; and that they sometimes fail to anticipate changes in their situations and themselves as they age. In many cases, the mistakes one makes are essentially due to a failure of the imagination (creativity, divergent thinking): a failure to picture possible scenarios accurately enough or, alternatively, a tendency to weigh, however precisely, a too-limited set of options or to construct a restrictive and overly abstract set of outcomes. This could happen for various reasons, from lack of critical thinking to limited exposure to diverse possibilities to poor memory of various scenarios. Relying too much on statistical knowledge as a substitute for contextual understanding of future possibilities would exacerbate instead of ameliorating these tendencies; there is a reason why concern with creative thinking is a staple in business, clinical, and educational contexts, to the point where phrases like “thinking outside the box” have become clichés. It is in the discovery of options and possibilities where most of the challenge of decision making lies, not in precisely comparing predefined and given options.
Like orthodox neoclassical economics, behavioral economics does not tackle any of these important aspects of decision making; its findings, ultimately, tell us very little about how people think. Artificially induced quirks of human cognition are examined in excruciating detail while everyday decision making of great individual and social consequence are ignored.
Kahneman’s undue focus on cognitive blunders that are defined as departures from the rational-choice norm is symptomatic of his failure to liberate his decision theory from simple consequentialism. His book’s illustration of the “endowment effect” (292–93) is one of the most striking examples of the closure of his research agenda within the narrow neoclassical framework. “Professor R” (later known to be Richard Rosett at the University of Chicago) bought wine at auctions at a price not higher than $35. Professor R would, however, not sell the bottles he already bought unless he was offered more than $100, which Kahneman interprets as evidence of a bias towards overvaluing an object simply because one owns it. The endowment effect has been documented in other cases, of course, although its importance in economic contexts has been disputed (List 2003and 2004). Regardless of the existence of the effect itself, however, it is baffling that Kahneman would in the first place assume, for example, that Professor R is supposed to be a profit maximizer when it comes to his wine collection. The same is true of other behavioral economists; Richard Thaler (2015, 17) describes Rosett’s behavior as “not rational.” Yet the professor is obviously not a wine trader; he collects wine for pleasure. If we see an error in his actions, that is only because we implicitly treat him as a rational maximizer—and only in order to show that he is not a particularly good one.

Composition (HUM425)


This photo of Joe McCarthy doppleganger Ted Cruz, among a series that were published then withdrawn by AP after complaints by several pundits, demonstrates emphatically that composition, the relationship between elements within the visual field, can signify powerfully. The photo was taken while Cruz, who wants to be your president, spoke at a “Celebrate the 2nd Amendment Shooting Range” in Johnston, Iowa on June 20.

credit: Charlie Niebergall credit: Charlie Niebergall

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Using ‘complexity thinking’ to manage an increasingly complex world – by Paul Cairney, Robert Geyer and Nicola Mathie

ElgarBlog from Edward Elgar Publishing


Complex policy-making systems are ‘greater than the sum of their parts’.  To understand them we must examine not only the individuals involved but also the ways in which they interact with each other, to share information and combine to produce ‘systemic behaviour’.  Professor Paul Cairney,Professor Robert Geyer and Nicola Mathie consider what is involved in using ‘complexity thinking’ to inform policy decisions.

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Economics and the value of art

More than a “Veblen good” the recent record auction price for Picasso’s “Les femmes d’Alger (Version ‘O’)” signals that the extraordinarily wealthy have nothing better to do with all of the surplus value that they have captured.

occasional links & commentary


Neoclassical economists don’t have a lot to say about the value of art. Basically, they start from the proposition that a work of art, such as Picasso’s “Les femmes d’Alger (Version ‘O’),” is often considered to have two different values: an aesthetic or cultural value (its cultural worth or significance) and a price or exchange-value (the amount of money a work of art fetches on the market). They then demonstrate that, within free markets, individual choices ensure that the price of art generally captures or represents all of the various dimensions of value attributable to the work of art, rendering the need for a separate concept of aesthetic or cultural value redundant. Therefore, on their view, Picasso’s painting is “worth” the record auction price of $179.37 million.*

But the Wall Street Journal (gated) observes that yesterday’s sale of other paintings—including Mark Rothko’s “Untitled (Yellow and Blue)”—reveals something else:

Some paintings act like object lessons in tracking the global…

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Models, maths and macro: A defence of Godley

Critical Macro Finance

To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences.

The quote is, of course, from Piketty’s Capital in the 21st Century. Judging by Noah Smith’s recent blog entry, there is still progress to be made.

Smith observes that the performance of DSGE models is dependably poor in predicting future macroeconomic outcomes?precisely the task for which they are widely deployed. Critics of DSGE are however dismissed because?in a nutshell?there’s nothing better out there.

This argument is deficient in two respects. First, there is a self-evident flaw in a belief that, despite overwhelming and damning evidence that a particular tool is faulty?and dangerously so?that tool should not be abandoned because there is no obvious replacement.

The second deficiency relates…

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As the BOC action today shows

it is good to avoid spurious talk of ‘normalizing monetary policy’ when we are living in a paradigm of wage stagnation, precarious employment, household indebtedness, rising inequality, and job losses from off shoring and technological change.

Monetary policy is supposed to be the elixir to fix this?

My disagreement on Twitter from last January…


The busiest infographic you will see today

This Marketing Technoclocy Landscape Supergraphic is by Scott Brinker over at chiefmartec.com. While not exhaustive it must come close and once you discern the various sections: Marketing Experiences. Marketing Operations, Marketing Environment from Infrastructure, Backbone Platforms, and Middleware, you can drill down into sub categories and see his list of companies that exist and compete in those spaces. With the fluid nature of technological change we will no doubt see many more entrants into each category with many failing but the shake out over the coming decade will change the face of how marketing is done from the back end to the front line and every touch point in between.

Marketing Technolocy Landscape

You can download the pdf marketing_technology_jan2015.

Brinker’s four takeaways for readers are:

  1. Marketing has unquestionably become a technology-powered discipline.
  2. The quantity of martech ventures is a barometer of how much marketing is evolving.
  3. The marketing technology field is heterogenous, with a very broad range of products.
  4. To thrive in this environment, marketing should steadily develop its technical talent.

Read the rest of his post.