EKIP– Expert Club for Economics and Politics A Different Opinion
There is no topic that has generated as much controversy in economics as the "rationality" of economic agents. Critics of "homo-oeconomicus" deny both its existence and the ability of economics to explain real processes and phenomena. This is the so-called "bad input/bad output" problem, i.e. when you build a construction based on wrong assumptions, the conclusions drawn are also wrong. In this case, the assumption of selfish and "rational" individuals misses a very important aspect of the motives that drive a person, namely morality, ethics and solidarity towards their fellow man. This omission nullifies the theses laid down in economic theorems.
Adam Smith studied the role of man in two separate spheres, that of social man in his book "The Theory of Moral Sentiments" and that of economic man in "The Wealth of Nations". Economic man, according to Smith, is driven by egoism, his only goal is to maximize his monetary well-being. In contrast, social man is moral, altruistic and subject to the ethical norms of society. Smith's dualistic approach questions the validity of economic theorems and leaves the door wide open for criticism. Statists, for example, doubt the effectiveness of free markets precisely because of the neglect of the role of social man, which automatically makes market solutions suboptimal for them.
A major problem with the "rational" assumption is the simplification of reality. People are not machines endowed with impeccable logic, capable of making the most correct decisions at any given moment. On the contrary, in everyday life people often make mistakes that they later regret. Therefore, very often rational decisions are displaced at the expense of impulsive ones. However, mainstream equilibrium models rest on the "rational" assumption, which practically renders them meaningless.
Two arguments stand out in the literature in response to the above problem. The first is that of mainstream economists or those who practically introduce "homo-oeconomicus". According to them, although their models are not a perfect representation of reality, they are a very good approximation and therefore the conclusions drawn cannot be simply annulled. Of course, this way of defending your position rests on the subjective assessment of what is a good approximation and what is not. Instead of putting an end to the dispute, such an argument opens a new page for discussion.
The heated criticism and inadequate defense encouraged mainstream economists to develop their models in a new direction - to make them more complex and more "socially" oriented. Thus arose welfare economics, which paid attention (or at least claimed to) to the "social man". Over time, famous economists such as Pareto, Hicks, Samuelson and Stiglitz laid the foundations, developed and refined "welfare economics", opening the door wide open for the rise of the "social" state, which is confidently heading towards its collapse (for an example, see HERE ).
The second answer is that of the Austrian School, namely that economics studies human action and is not interested in the motives (egoistic, moral, ethical, etc.) that gave rise to this action. For critics, this answer simplifies things and circumvents the problem by simply ignoring the various motives accompanying each decision. The following lines will try to defend the thesis that a) the "rational problem" lies in the wrong understanding of the subject of economics and the incorrect interpretation of the "rational" component, b) the defense of mainstream economists is not only wrong, but also develops economic science in the wrong direction, c) the answer of the Austrian School is adequate and sufficient.
The subject of economic theory is the market process. Economics studies the interactions between people that give rise to this process (Kerzner 1992). Austrian economists use a method (called praxeology) that does not place constraints on the motives of economic agents. In particular, economics does not claim to explain how individuals make certain decisions based on certain information; it attempts to explain the spontaneously changing information on the basis of which decisions are made within the market process.
Mises and Rothbard are very precise in defining the subject matter of economics. For example, Rothbard offers the following list (Rothbard 1962):
- Why man chooses various ends: psychology.
- What men’s ends should be: philosophy of ethics also: philosophy of aesthetics.
- How to use means to arrive at ends: technology.
- What man’s ends are and have been, and howman has used means in order to attain them:history.
- The formal implications of the fact that men use
means to attain various chosen ends: praxeology.
Why a person makes a given decision and what a person's decisions should be are questions that economics does not answer because it enters the realm of psychology and ethics. Praxeology or the Austrian method is intended to explain the consequences of a person using certain means to achieve his goals. Criticism of the Austrians' monistic approach is unfounded because it confuses the subject matter of economics with that of other sciences. Market phenomena (demand, supply, prices, profits and losses, income, interest, etc.) are the result of both selfish and moral and ethical motives and decisions, i.e. they are the result of human action.
Consider the following subjective scales of Ivan and Emo:
| Ivan | Emo |
| 1. 100 BGN. 2. bread 3. 100 BGN donation to a hospital 4. 50 leva donation to an orphanage 5. bottle of beer |
1. bottle of beer 2. bottle of beer 3. 100 BGN. 4. bottle of beer 5. bread |
Obviously, the altruistic individual in this case is Ivan, but in practice economics is not interested in who Ivan is, why his preferences are the way they are, whether they are rational or not. Economics is interested in how Ivan and Emo can use scarce resources in a way that satisfies their needs. Ivan and Emo's subjective scales are a starting point in the analysis, not something that needs further comment.
Therefore, we need a completely new concept of "rationality", different from the one used in everyday language. "Rationality" from the point of view of Austrian economists means that a person purposefully chooses one action over another. This kind of "rationality" differs from the other kind of "rationality", which refers to a person's decisions themselves, based on iron logic, subordinated to selfishness and the maximization of well-being. A person can be rational even if he makes wrong decisions, which he very often regrets later. Austrians do not exclude error from human action, on the contrary, they use it to explain a number of important market phenomena. Austrians do not exclude morality and ethics as motives for a given action, because their analysis begins after that.
The difference between mainstream and Austrian economists is that the former use "rationality" in the context of the way individuals make their decisions, for which they are quite deservedly criticized. The problem comes from their approach to understanding the market not as a process of spontaneous discovery by entrepreneurs, but as a state devoid of human action. For them, the market is a constant equilibrium. And in a state of equilibrium there is no room for the dynamic function of the entrepreneur and for pure profit and loss, which makes the step to assuming completely "rational" individuals a formality.
Unlike mainstream economists, the Austrians find the optimality of the market not in its equilibrium and its being inhabited by "rational individuals", but in its innate mechanism for individuals to learn how to use scattered knowledge in the best possible way. As Hayek wrote in his article entitled "The Use of Knowledge in Society" - " The economic problem of society is therefore not simply a problem of how to allocate "given" resources - if "given" means given to a mind that deliberately solves the problems posed by these "givens". It is rather a problem of how to ensure the best use of the resources known to each individual member of society, for purposes whose relative importance only those individuals know. Or, to put it briefly, it is a problem of the use of knowledge that is not given to anyone in its entirety " (Hayek 1945).
Literature:
Kirzner, Izrael M. (1992) The Meaning of Market Process
Rothbard, Murray N. (1962) Man, Economy, and State
Hayek, Friedrich A. (1945) The Use of Knowledge in Society
Yet another article that ignores the last 30 years of scientific development.
So, for variety, read a textbook on modern microeconomics and macroeconomics.
Any graduate economics textbook will do the trick.
The article is about the fact that there has been more than 30 years of regression in science.
On my website, I have written about the impact of property taxes on a country's economy. As I see it. About the bubble in property prices, both in Bulgaria and around the world.
@Smilen Monev
I completely share the author's opinion. And he has certainly read a lot of textbooks on modern economics. The problem is that what is in these textbooks does not correspond to the facts. I recommend reading something by David Kahneman, for example "Thinking, fast and slow". The man is a Nobel laureate in economics, although he deals with psychology (empirical). His studies are relatively new (dozens of years), but they empirically prove that the so-called rational man is a myth, which, however, is very well suited for mathematical description and is therefore used in economic theories. You need to distinguish between postulates and evidence. Economic mathematical theories are developed with mathematics (currently), but are based on postulates that are simply accepted as true with heroic confidence. And if one postulate does not correspond to reality (like the one about the rational man), then the entire subsequent theory goes to waste. That is, It should go there, but it doesn't because people don't give up their beliefs easily. Economics is not an exact science and as such is susceptible to all kinds of popular beliefs. Not to mention that what one learns in school and university remains practically eternal: "Did my teachers lie to me or were they fooling themselves? And reality is not as everyone describes it? Absurd! The one who advocates such ideas is crazy!". For the same reason, the earth "was" flat for hundreds of years because this was more than obvious and the only socially acceptable opinion.
@Smilen Monev
Also, specific criticism would be a much more mature comment. And I can only agree with the above commenter that the author has read a lot of textbooks.
@Dimo Stefanov
"The article is about the fact that there has been more than 30 years of regression in science."
Actually, this does not concern us (Bulgarians). Back in 1990, our Brains (with a capital M) understood that the science of economics is in "regression" and therefore simply decided not to study it in Bulgaria. Moreover, what is known worldwide as "business education" in our country was renamed "economic education". An ingenious solution, in which on the one hand there is no danger of the decadent regressive Western influences (sciences) affecting us, and on the other hand we have the most economists per capita in the entire world. So, why should people suffer when there is no point. Two introductory courses - one in micro and one in macroeconomics are completely sufficient for the Bulgarian genius. The result is there - all accountants, marketers, etc. are economists.
As for mathematics, here too we are at the forefront. Why do we need modeling, analysis, stochastics or econometrics when they are already wrong? Instead of training such specialists and wasting valuable resources, it is much more effective to act on intuition, looking at the ceiling and throwing beans.
@Toto5
It distinguishes between micro and macroeconomics. In general, as far as I am aware, there are no problems in microeconomics. And if it is not taught properly in Bulgaria - then you are right to criticize. A company needs microeconomists and if they are missing or not up to standard, then it is bad.
The problems are in macroeconomics. It is wrong in many places. A typical contradiction between micro and macro is the claim (modern belief) that while saving is a good thing for the individual, it is bad for the economy as a whole. In this sense, if macroeconomics is not studied in Bulgaria, it would even be better for our economy. It is better to know nothing (and not to touch where you should not) than to know the wrong things and act on their basis.
@EE
"The problems are in the macroeconomics. It is wrong in many places."
The problems are in our heads. Euclidean geometry is also wrong in many places and is not the only theory. This is not a problem, however, to use it for practical purposes. Let's just give up on it and deny it completely because it is not 100% correct.
Macroanalysis is the first thing that is done when making investment decisions, entering/leaving a certain market, etc. However, analysis is not done by looking at the ceiling and philosophically musing about life and everything else. That is, macroeconomics cannot be ignored even if the state disappears completely.
The instillation of the opinion that the mathematical apparatus is superfluous is understandable. In Bulgaria, economics is not studied and people who call themselves "economists" have no idea about the subject. When you don't understand something, the easiest way is to avoid it or deny it. However, the results are deplorable and lead to wrong decisions and losses.
@Toto5
"The problems are in our heads."
I'm not arguing about the above at all! 🙂
"Euclidean geometry is also wrong in many places and is not the only theory. However, this is not a problem for using it for practical purposes. Let's just give up on it and deny it completely because it is not 100% correct."
Euclidean geometry is valid with enormous (99.99...percent) accuracy for all practical situations, and for this reason your example is bad.
"Macroanalysis is the first thing that is done when making investment intentions, entering/leaving a certain market, etc. However, analysis is not done by looking at the ceiling and philosophical reflections about life and everything else. That is, macroeconomics cannot be ignored even if the state disappears completely."
"The instillation of the opinion that the mathematical apparatus is superfluous is understandable. Economics is not studied in Bulgaria and people who call themselves "economists" have no idea about the subject. When you don't understand something, the easiest way is to avoid it or deny it. However, the results are deplorable and lead to wrong decisions and losses."
If the assessment of a market (for example, that of computers) is guided by macroeconomics, then I would agree with you. However, I doubt that any macroeconomic theories are used in such an assessment (you tell me). And if they are used - very bad for those who use them. Most likely, the current situation is looked at and extrapolated in the near future where things will go. Making calculations for 10 years is a bit like throwing beans. You never know what the government will do in your industry, when the next global or local economic crisis will come and how deep it will be, not to mention the change in consumer attitudes and searches, as well as technological innovations.
In the above sense, mathematics can help you predict the near future, but only on the condition that trends do not change, and the latter is generally not fulfilled. For example: now the demand for computers is growing by 5% per year, and this means that in 3 years I will not be able to satisfy it with my existing factory. Therefore, I have to start building a new one right now. I start building the factory and the next moment the Great Recession (as they call it) comes. Economic theories do not predict it, and according to them it cannot even be predicted at all. And what do we do? Is a company that has calculated differential equations better than another that has not?
I don't argue that calculus of integrals seems like a serious and responsible activity, but the question is how much benefit is there from it. If there is no benefit, then it is pointless, no matter how great and serious it may seem. And as far as I have read, practice shows that the benefit is not great.
Unfortunately, I can't comment on what exactly should and shouldn't be studied in Bulgaria. I'm just not familiar with it.
@EE
Honestly, I can't understand the idea of you libertarians. You are supposedly fighting for certain values, but you almost always achieve exactly the opposite effect. A few clarifications:
1. The article was written most likely influenced by foreign (American) reality, where the scale of companies and the market require the use of increasingly complex mathematical models and tools.
2. These problems do not concern us at all, since economics as a science is almost non-existent in Bulgaria, and there are even fewer subjects who try to influence the market and business and motivate this with mathematical models and other tools.
3. Those who determine public opinion and who try to manipulate the market do not use mathematical apparatus at all for the simple reason that they have never studied it. Most of the public so-called "economists" have a business education and are very far from economics as a science.
That is, if in the USA it is normal to appeal not to pay so much attention to mathematical models, then in our country the aspiration should be in exactly the opposite direction - little by little the analyses of the so-called "economists" should take into account science, and not just the personal opinion of the authors.
Here's an example, not abstract like yours about computers, but quite real:
For some time now, business has been experiencing a shortage of technical personnel. The "economists" from various employer organizations and business associations have fixed the problem and flooded the media and institutions with "analyses". In them, the main problem is the education system - universities are not producing enough engineers. These analyses are based solely on the opinion of employers and on two principles:
- Denial of rational behavior - what the author wants
- Disregard for mathematics (in this case statistics) - what you want.
For reference, here is what the statistics show about the average salary of graduates of certain specialties:
TU, mechanical engineering - 848.12 leva; UNWE, economics - 1102.22 leva
TU, electrical engineering, electronics and automation - BGN 1047.27; SU administration and management - BGN 1368.46.
To the uninitiated, it is obvious that it is irrational to put in more effort (engineering majors are generally harder to graduate from than business majors) and as a result end up earning less money. It is quite rational and normal to avoid these majors - a very normal market reaction. However, analysts do not think so. Here is what they suggest:
"By the end of 2014, a new interdepartmental structure will be established by a Cabinet act for analysis and forecasting the needs for specialists with higher education - in cooperation with employers, unions and industry organizations. The estimates of this institution will form the basis of the plans for the number of students and doctoral candidates admitted to higher education institutions and scientific organizations for the respective academic year."
Is that the goal? Administratively and subjectively determining who will learn what and where from some secret committees. The current system, despite its shortcomings, is much more market-based than what is offered to us. These are the effects that libertarians achieve when they parrot other people's thoughts that concern other people's reality - instead of strengthening the market, they help to destroy it.
@Toto5
"You're supposedly fighting for certain values, but you almost always achieve exactly the opposite effect."
I know your opinion about the available public libertarian figures and their actions 🙂 .
I would ask you not to lump me in with the general crowd, however. For example, I am not a supporter of Hayek (as they are in the IME, as far as I understand) and therefore I am a non-democrat (I take an absolutely unacceptable public position).
"..where the scale of companies and the market necessitate the use of increasingly complex mathematical models and tools."
When you say the word "imperative" it is implied that without what is "imperative" you cannot do. And that if we don't use it it will be bad. But is that so?
Let me give you an example from my beloved Nassim Taleb. He has been in the stock market for many years. And he found that the stock market is not interested in mathematical theories. They even try not to hire macroeconomists because they trust theories too much. The stock market has its own rules of thumb that they work with. And some of the people there probably can't even write properly. They are so high-minded. However, at one time in the past they decided to use some mathematical model and invited a lot of mathematicians from Russia (the theoretical part is very well developed there). The only noticeable improvement was that their chess skills improved significantly (chess is a popular game in Russia).
Another example: You've probably heard of Long Term Capital Management. A company of Nobel laureates who decided to put their mathematical models into action. The result of this company is that it threatens the US banking system with bankruptcy, which in turn leads to the first of many government interventions to directly save companies. That is, the first bailout in the US.
In short: make all the macroeconomic mathematical models you want. The problem is that they are unreliable. And the reason is that the future SIMPLY CANNOT be predicted. You can extrapolate into the near future and hope that nothing will change, but you have zero guarantee that there won't be a war or something like that tomorrow.
Making and following such macroeconomic models can lead to very bad consequences for companies and the economy as a whole (when they are followed at the state level).
"Is that the goal? To administratively and subjectively determine who will learn what and where by some secret committees."
I generally agree with your opinion, but in my opinion you are not looking at things correctly. You are describing to me an attempt to IMPROVE the existing system. Until now, the number of students has been practically determined by political and historical considerations ("We cannot reduce the philosophy faculty, people work there anyway!" "Last year we paid for 100 cultural studies students. Let's have 98 this year." etc.). According to what you are describing, they are trying (!!!) to take the opinion of the market into account. It is clear that they will not succeed, but even a little attempt is better than nothing. Until now they have simply stopped the change, and now they will try to follow it a little. God forbid that they will one day close the Ministry of Education and Science and others like that, but what luck for the Bulgarian population.
@EE
I don't do analyses, I use them. I wrote to you before that I am not an economist, and I don't have a business education.
"When you say the word 'impose', it is implied that without what is 'imposed', it cannot be done."
No, I'm saying that the market THERE imposes it. Otherwise, business and government can easily do without mathematical models - Bulgaria is a living example of this. Here, only foreign companies are looking for decent economists. The government, various NGOs, unions, employer associations, etc. do not need such personnel and can easily do without them.
"You are describing to me an attempt to IMPROVE the existing system. Until now, the number of students has been practically determined by political and historical considerations ("We can't cut the philosophy faculty, people work there anyway!" "Last year we paid for 100 cultural studies students. Let's have 98 this year," etc.). According to what you are describing, they are trying (!!!) to take the opinion of the market into account."
The number is determined mostly by those who want to study exactly that. If there are no willing people, all sorts of tricks are unnecessary. Philosophy graduates at Sofia University receive an average of 902.11 leva (3.03% unemployment), and those from the field of sociology, anthropology and cultural sciences - 949.41 leva (unemployment 2.02%), compared to 848.12 leva (2.98% unemployment) for those who graduated from mechanical engineering at the Technical University. It is obvious that it makes more sense for young people to study philosophy or cultural studies at Sofia University, rather than the alternative mechanical engineering at the Technical University. On the one hand, they study with less pressure, on the other hand, they clearly find application and benefits from their education (relatively low unemployment), and on the third, they are better placed (higher pay).
@Toto5
Mathematics, and in particular differential and integral calculus, have no place in economics. It may be useful in many other areas (calculation of complex volumes and lengths, on which physics, chemistry and statistics are practically built [see: Stewart - Calculus - Early Transcendentals 6e HQ (Thomson, 2008)]), but in economics, which studies human action, its application is not what it is attributed to, and I have explained why in the article.
@EE
In my opinion, incorrect things are taught in both macro and micro courses at universities.
@Dimo Stefanov
Of course, mathematics has no place in OUR economy. EE is right about one thing - the future cannot be predicted. Declining Western capitalists try to use mathematics to predict things and often make mistakes. However, we do not need forecasts - we plan and therefore we are not wrong - things always happen, and if they go wrong, the culprits will be the crisis, the international situation, Boyko, Tsetso, Kostov, the nasty Sorosoids, the stupid communists or the Syrians. Planning does not require mathematics, but as the mother party commands, will - will for arbitrary reforms, for commissions to decide who will pay what insurance, who will study where and what, etc. Why do we need analyses that will only prevent us from planning where there will or will not be a reactor, a pipe or a bridge. It is much easier for a minister to decide this single-handedly, using the old and tried-and-tested Soviet method, than to use some crazy, incomprehensible and redundant American exercises and models.
@Toto5
"Otherwise, business and government can easily do without mathematical models – Bulgaria is a living example of this."
A mathematical model is made to be used.
If the government makes economic models, it aims to use them. That is, to intervene in the market economy and do something anti-market in order to achieve some "socially beneficial" goals. This is bad in itself and for this reason the government would be better off without such models, and it would be best not to interfere in the economy at all (then the question arises as to why it should exist at all).
Business makes economic models because it needs them. Without them, it cannot plan its affairs. A businessman cannot understand what he should produce if he does not try to look ahead, at least a little into the future. However, these economic models concern the specific company and most of all the industry in which it is located. And as I said - in my opinion (I have no experience in this matter) they are simple extrapolations of the current situation with adjustments for probable future effects.
However, there is no guarantee that what is predicted will happen. We can only hope that the businessman's calculations will turn out to be correct. A huge number of businessmen make mistakes (with or without mathematical models) and go bankrupt completely (bankrupt) or partially.
What economic science can offer (Austrian economic theory) are only some trends. Modern economic science (the one being studied) claims to predict the future. In contrast, the Austrians do not claim to be god and only say the following: Based on economic laws, as we know them, we can outline a trend that represents the greatest probability. But we cannot say when the given prediction will happen, or even whether it will really happen. The future cannot be predicted and the reason is that human and natural reactions are simply not predictable. These trends at any moment in time can be reversed, stopped, compensated by something else, etc. For example: the Austrians claim that economic crises (cyclical ones) occur because the state plays god with the economy (i.e. with a system with a fantastic degree of complexity that no one can comprehend and predict) by printing money and interfering in it. Based on this, it can be said with certainty that cyclical crises have existed, exist, and will exist in the future. However, it is impossible to say: when, how deep it will be, which industries will balloon, etc. And there is no guarantee that in the meantime, for example, the United States will not declare war on North Korea and the so-called crisis will not be replaced by an artificial one (war).
There are empirical studies on how accurate the predictions of economists (including Austrians) are compared to those of an ordinary person (for example, a taxi driver), and it turns out that the difference is negligible. They are all mostly wrong. Only one specific thing has been established: The more famous the economist, the more wrong his forecasts are. However, macroeconomists are believed DESPITE the fact that they have not been able to predict anything correctly so far. And the reason is that they pretend to be scientists, who know and use mathematics. And they also wear a tie and a formal suit and look very serious. Here is Bernanke: with a beard, at an age, he looks like a real "elder": a knowledgeable and capable, a seething and seething person, whom you can count on to fix the mess we are in (and which people like him have got into). In fact, there can be no experts in economics. It has its limits, which the Austrians recognize, but modern economic theory does not.
"The number is determined mostly by those who want to learn exactly that. If there are no willing participants, all sorts of tricks are unnecessary."
There is a difference in the economic and commonly accepted definition of "want".
You use it in the sense of: he wants it and because it's free (or almost free) he applies and takes the given place. I.e. I really love philosophy and I like studying -> I apply for philosophy and the state, seeing that there are candidates for the philosophy faculty, increases the places there.
In economics, "wanting" means: you have the desire AND THE ECONOMIC OPPORTUNITY. That is, I want to study philosophy, but if I can't pay for the education at market prices, I won't get it. Only in this case will the education be truly determined by the market. That is, you look at what is paid for and that's what you offer. In this sense, in my opinion, a philosophy faculty would not exist at all, or if it did exist, in a free market it would be something tiny. And the reason is that money cannot be made from philosophy, except in the limited cases of lecturers, trackmen, rich amateurs and others like that. Anyone who has the interest AND THE OPPORTUNITY would pay for the education, then these would be a tiny part of today's people.
"Philosophy graduates at Sofia University receive an average of 902.11 leva (3.03% unemployment)"
I'm curious how they define an unemployed philosopher. If a person graduated in philosophy and then, due to lack of work, works as an ice cream seller, then he hardly falls into the "unemployed philosopher" column (3.03% unemployment). However, the latter represents the so-called waste of resources, when people en masse work for something other than what they studied for. All the money thrown by the state for education is thrown to the wind. This is what state intervention leads to.
However, in school we are taught and people believe that whatever the state does, it does it for our good and even if it makes a mistake, it made a mistake out of good intentions (there used to be a phrase "The Party (BCP) is right, even when it makes a mistake").
@Dimo Stefanov
"In my opinion, both macro and micro courses teach the wrong things in universities."
You are very likely right, but I personally cannot speak out because I did not study economics at university and I simply do not know. I quoted someone else's opinion.
However, in my opinion, there cannot be as many errors in microeconomics as in macroeconomics because the errors will directly and immediately affect companies. That is, macroeconomics cannot necessarily be as far removed from reality as in microeconomics, where the effects of erroneous theories are not directly visible, come with a delay, in other places, etc.
I saw a mistake. Please read:
"That is, MICROECONOMICS cannot necessarily be as far removed from reality as in MACROECONOMICS, where the effects of erroneous theories are not directly visible, come with a delay, in other places, etc."
@EE
There is no company that follows the micro-models, and if there is, it will go bankrupt. Moreover, mainstream micro-models are static, which leads to many complications, such as a wrong theory of competition and monopoly.
@Dimo Stefanov
I suppose you're right. I personally can't say anything.
And what exactly are the models being made, as Toto5 claims above?
@EE
"In economics, "wanting" means: you have the desire AND the ECONOMIC OPPORTUNITY. That is, I want to study philosophy, but if I can't pay for the education at market prices, I won't get it."
Of course there is. Engineering education is many times more expensive than that of philosophers. Engineers need laboratories, equipment, etc.. Philosophers need one hall and nothing else. That is, under market conditions, employers with these salaries of 800 leva will be left completely without engineers. No one is crazy to pay a lot of money, put in a lot of effort and in the end receive a salary of a seed farmer. The problem with technical personnel is analogous to the problem with the lack of doctors. The demand is global, and the supply is local. It's just that Bulgarian employers, regardless of whether they are industrial companies or medical institutions, are not competitive in the global demand for specialists. Or if I have to use your example, "I want doctors and engineers, but if I can't pay them at market prices, I won't get them." If you've heard someone blame the education system for insufficient production of doctors - there is none, because everyone knows that the problem is different. What you call "an attempt to improve the system" is actually an attempt to circumvent the market.
"I'm curious how they define an unemployed philosopher. If a person graduated in philosophy and then, due to lack of work, works as an ice cream seller, then he hardly falls into the "unemployed philosopher" category (3.03% unemployment).
It's interesting why you put the concepts of "profession" and "education" under a common denominator. The purpose of higher education is to give you skills, knowledge and competencies that will later help you in life, not a profession. Which knowledge and skills are useful for a particular person is a problem and solution for the individual, not for the system. There is no such education that will prepare you for every job and every profession, and this has never been the purpose of education. Around the world, people study science or art (Science or Arts) and delve into one or two areas (major), and do not study "specialties". Around the world, people do not "graduate" and do not become "specialists - philosophers", but receive a "degree in philosophy". The very word "Degree" clearly shows that this is only one stage of development, and the horizon before you is open. Like everything else, our terminology is wrong, an echo of another time, and from there our expectations of the educational system are also wrong. And I don't feel like talking about what is waste and who should do what depending on their education. Over 20 years have passed since those times when someone else always determined who should do what and we still haven't moved an inch.
@Dimo Stefanov
"There is no company that follows the micro-models, and if there is, it will go bankrupt. In addition, mainstream micro-models are static, which leads to many complications, such as a wrong theory of competition and monopoly."
This has become something like "sour grapes". Look at the programs and what the top universities in the US offer. They all have "dry, theoretical and unnecessary" undergraduate programs in economics, without any practical focus, and almost no one has (very rarely) undergraduate programs in business - no accounting, finance, marketing, etc. Not only that, but there are almost no similar courses in economics programs.
It's interesting why employers prefer bachelors from Harvard, MIT, Princeton or Yale and what they do with all this unnecessary knowledge.
But let's not go to America. Let's see AUBG. Their economics program is 100% theory, without a single course with a practical focus. There is no trace of accounting, finance or anything of what is understood as "economic" education in Bulgaria.
Here are the courses they teach. Find something inside that you think makes sense:
http://www.aubg.bg/template5.aspx?page=4502&menu=001000003000
However, employers have clearly made a mistake and are paying the highest salaries in Bulgaria for these "unnecessary skills". It is interesting what they are being paid so much for and what skills they are using.
@Toto5
"That is, under market conditions, employers with these salaries of 800 leva will be left completely without engineers. No one is crazy to pay a sum of money, put in a huge effort, and in the end receive a salary of a seed dealer."
Now, if we change the system, that's exactly what will happen. There won't be enough people willing and able to pay, and employers won't have enough people in the future. However, the market economy is very flexible. You'll get one of the following or a combination of the following: training prices will fall, probably the volume and quality of training will also fall to the bare minimum, wages will go up, some employers will go bankrupt. In the end, you'll have a stable system. You'll just have to wait out the transition process, which can't be avoided. When you get drunk, you have to go through the hangover phase to recover. You can try just continuing to drink, but that will have even worse consequences in the future.
Again regarding the previous post: In the market there is a so-called equilibrium market price at which the demand and supply of a given product/service/resource are equalized. What the state does is that in most cases (for example, philosophy) the price of the product (from the consumer's point of view) is subsidized. That is, you can get a philosophical education very cheaply. Accordingly, people who otherwise could not afford it are drawn to philosophy. The state keeps prices low and, accordingly, the demand for philosophical education expands.
From another perspective, however: you can't just become an engineer. The university/college must be recognized by the Ministry of Education. And the Ministry of Education allocates about 1,000 places for training engineers at recognized universities. And that's how many are trained. However, there is a shortage. But there's no way to fill it. Normally, this would be done with a shorter education (just the basics) for more people, but there's no way, because it's not allowed by the state. What sometimes happens is that employers hire and train people for their own purposes, which is very inefficient. That's why universities and schools exist, because they are more efficient.
"I wonder why you put the concepts of "profession" and "education" under a common denominator. The purpose of higher education is to give you skills, knowledge, and competencies that will help you later in life, not a profession."
Higher education, at least as it is in Bulgaria, has both goals, not just to develop your thinking.
That is, after graduating in history, you are expected not only to have a general understanding of history, but also to be able to work as a historian somewhere, and not just to study the problems.
When you just want to develop your thinking and general skills, do it like in the US: You choose a lot of general courses, in different subjects, without specializing in anything.
"Which knowledge and skills are useful for a particular person is a problem and solution for the individual, not the system."
I would replace "is a problem" with "should be a problem" because right now this is a system problem.
@EE
Honestly, I can't understand you. On the one hand, you deny rational choice, and on the other hand, you propose a hyper-rational model.
"Higher education, at least as it is in Bulgaria, has both goals, not just to develop your thinking.
"That is, after you graduate from history, you are expected not only to have a general understanding of history, but also to be able to work as a historian somewhere."
I don't know what world you live in. This can be done, but you have to bring back the old system and reintroduce mandatory distribution.
Business is not interested in what is written on your diploma, but in what skills you have. The skills that come with a liberal arts education are in many ways irreplaceable. Here is what they recommend as a career orientation for Bachelors of Philosophy at the University of Warwick:
"Philosophical training is valuable for a very wide variety of careers. Our students have had success in jobs that require rigorous and imaginative thinking in response to complex problems, including accountancy, banking, consultancy, IT, journalism, law, marketing, media, management, recruitment, as well as teaching and research in Philosophy and related areas."
Now run a Google search:- linkedin bachelor philosophy sofia university and see what kind of realization people with a philosophy education from Sofia University have. Ha, surprise, they didn't teach philosophy, wooden philosophers or just philosophers, but work in the same fields and in the same positions as their colleagues from Warwick. That is, the same education, the same skills (I'm not talking about quality), the same results. In the end, this should be considered a success for Warwick (a fulfilled goal) and a failure and waste of the educational system in Bulgaria, because you see, these guys don't work in their "specialty".
@Toto5
"Honestly, I can't understand you. On the one hand, you deny rational choice, and on the other hand, you propose a hyper-rational model."
I'm not sure what you're accusing me of. I can only guess.
My thesis is this: Man as a person is a mixture of rational and irrational behavior. Rational behavior is buying food so you don't die, drinking water, and so on. There is also irrational behavior such as: arguing with your neighbor because you are in a bad mood at the moment, wasting your salary on gambling even though you know you will need it, smoking even though you have decided that this is bad for your health, and so on. The rational part, however, is the one that pushes humanity forward and it must be maintained. It is clear that a person cannot be completely and always rational, this is simply embedded in our genes, but it is necessary for a person to try to be, at least when the occasion is important. That is, as Taleb says, allow yourself to be irrational, this cannot be avoided, but not for important things. When it is important: choosing a job, a life partner, and so on. It's very good for a person to sit down and think, taking into account not only the facts at their disposal, but also their feelings (which is actually important for them). That's my thesis, but I don't know if I've clarified the right question for you.
"I don't know what world you live in. This can be done, but you have to bring back the old system and reintroduce mandatory distribution."
I don't know what you're talking about. I said above that if you just want to develop your thinking, then take general courses and that's it. You don't need any specific equipment at all - therefore - no expensive laboratories. However, that's not the system in Bulgaria. Here, to become an engineer, you need to have a skill specific to engineering education, for example, having handled a multimeter. There's nothing wrong with the latter, but this is already a completely specific skill for the respective profession, not a general one. And if you notice - for this purpose you need a multimeter.
"Business is not interested in what your diploma says, but in what skills you have. The skills that come with a liberal arts education are in many ways irreplaceable."
Yes, that's right. At least in Bulgaria. In Germany it's not exactly like that (limited people). However, skills don't fall from the sky. And I'm not at all convinced that a humanitarian specialist (a doctor, for example) can easily retrain as a programmer. Some time ago, a colleague of mine had his head in his hands when he tried to explain simple statistical models to doctors (they are the ones who are concerned).
Regarding "waste": yes, it is a waste. Business doesn't care if you know what Aristotle or Socrates said, but if you can do a job for them. And sometimes the necessary requirements are very narrow (being able to write correctly, for example). And our system produces people who are more educated than they need to be in areas that no one will use. For example, studying the complete works of Ivan Vazov. Don't get me wrong, there is nothing wrong with studying Ivan Vazov. The bad thing is when you have studied him at someone else's expense (taxpayer's money) and then you yourself never use or appreciate this knowledge.
@EU
Wait a minute. So in words, you accept some rationality at the individual level, but you deny the influence at the macro-level - what is done in mathematical models. However, let's see what comes out of the examples of education. In your opinion:
1. It is rational for society to produce more mechanical engineers
Me - it's not rational for me to struggle for 4 years and finally receive 800 leva
2. It is not rational for society to train people in areas that no one uses.
Me - I don't care about the majors. I won't be so involved in studying (I'll be able to work), I'll get skills that are valued by employers, and in the end I'll earn more than a mechanical engineer. Therefore, for me it's quite rational to choose philosophy or cultural studies.
3. It is rational for society that education is not subsidized, but paid. This way, the market will determine what and where to study.
Me - well, good. For me, it's quite rational in this case to go to Denmark, Sweden, Austria, somewhere in Germany or France, where there are first-class universities that offer absolutely free education.
That is, you do exactly the opposite.
You accept individual rationality in words, but you deny its influence on a macro-level - what is done in mathematical models.
In practice, it is seen that you deny the totally rational individual and introduce some kind of rationality from a macro-level. However, it is not a resulting quantity arising from the rationality of individuals, but some other "social rationality".
That is, some kind of social rationality is introduced that says what is good and what is bad for society, without taking into account the rationality and needs of individual individuals.
This sounds familiar to me, but it's a question for another topic: http://nauka.bg/forum/index.php?showtopic=15190
@Toto5
"Wait a minute. So in words, you accept some rationality at the individual level, but you deny the influence at the macro level - what is done in mathematical models."
In mathematical models, it is assumed that man is completely rational. This is the problem. And with such an assumption, the mathematics comes out very well. That is why this assumption was chosen. The consequence is that we get a completely correct mathematical theory, which, however, has no connection with our reality.
"1. It is rational for society to produce more mechanical engineers
Me - it's not rational for me to struggle for 4 years and finally receive 800 leva"
It is rational for society to produce more mechanical engineers under market-determined programs (e.g. 1.5 years long) with market-determined training costs. That is my thesis. And I am not against people studying what they like simply because they like it. Just doing it at their own expense. By the way, society also has an account of such people. You never know where the next Mozart will pop up.
"2. It is not rational for society to train people in areas that no one uses"
Yes, because there is no income from this. People learn to improve their lives, not to make them worse (by wasting money, a person practically lives poorer).
"3. It is rational for society that education is not subsidized, but paid. Thus, the market will determine what and where to study.
"Me - well, good. For me, it's quite rational in this case to go to Denmark, Sweden, Austria, somewhere in Germany or France, where there are first-class universities that offer absolutely free education."
Well, yes, it's perfectly rational to leave, since there are fools out there who would sacrifice themselves so you could get something for free. However, that's not rational for that particular society.
"You accept individual rationality in words, but you deny its influence at the macro level - what is done in mathematical models."
I do not deny the influence on a macro-level, but I deny the mathematical models themselves because they start from wrong assumptions. That is, I claim that the influence is not what is claimed on the basis of the models. And what exactly it is, I do not know. I only know that it is not that of the models. It is easy to say what is not true, but it is difficult to say what is true.
"That is, some kind of social rationality is introduced that says what is good and what is bad for society, without taking into account the rationality and needs of individual individuals."
I start from "the rationality and needs of individuals" and thus derive from you the so-called social rationality (understand "market" rationality).
@EU
"I start from the "rationality and needs of individuals" and thus derive the so-called social rationality from you (understand the "market" kind)."
I don't see anything like that. I see some wishful thinking about "social rationality" that relies more on general reasoning.
Let's try to see how things would look from a market perspective, and the market for educational services is not imaginary, but concrete.
What is the macro framework of this market?
1. Bulgaria is a member of the EU, which results in the following restrictions:
- The country is obliged to comply with the Bologna Process. That is, the minimum duration of a bachelor's program is 3 years.
- Every university is obliged to provide equal conditions for admission, fees, etc. for all EU citizens.
2. Bulgarian citizens can study in any EU country and have the same rights as local residents.
3. The best Bulgarian universities are at an average European level, and most of them are positioned at the bottom of the ranking. There are no elite or good universities in Bulgaria (at the EU level).
4. University fees in the EU vary widely - from absolutely free to quite hefty sums, and this does not depend on the quality of education. There are expensive elite educational institutions and expensive outsiders. There are free elite universities and free crappy ones.
5. Bulgaria is the poorest country in the EU with the lowest incomes
6. At the general European level, there is a shortage of medical professionals, technical personnel and other specialists.
7. The labor market for the entire EU is open.
This is, in general, the macro framework. It follows that here, at best, we can talk about a segment of the single market for educational services in the EU, but not about some separate Bulgarian market. In this case, everything you are telling me about 1.5-year programs, about fees as a regulator, etc. has no relation to the market. The market is as it is - with these restrictions.
That is, your social rationality is derived from everything else, but not from the market.
@Toto5
To be honest, I'm having a hard time following your thoughts.
"The market is what it is – with these restrictions."
Yes, that's right. That's a fact. But this is not a free market. If there are restrictions imposed by force, then this is not a completely free, but a regulated (partially or fully) market. However, I don't see what you want to gain from this.
@EE
Well, it's hard. Libertarians always talk in abstract terms, while the rest of us are interested in real life here and now. It is regulated (partially or fully), not completely free and real. Let me repeat that. Somewhere above I gave you an example of a concrete analysis built on the principles you are agitating for:
- Denial of rational behavior – what the author wants
- Disregard for mathematics/statistics – what you want.
I wouldn't be interested in analyses if they didn't turn into policies:
"By the end of 2014, a new interdepartmental structure will be established by an act of the Council of Ministers for analysis and forecasting the needs for specialists with higher education - in cooperation with employers, unions and industry organizations. The estimates of this institution will form the basis of the plans for the number of students and doctoral candidates admitted to higher education institutions and scientific organizations for the respective academic year."
The analyses also include other recommendations:
"Overcoming the duplication and fragmentation of professional fields between higher education institutions in training in fields that coincide within the same region." - understand the destruction of competition
"Ending the self-serving practices of announcing avant-garde or unconventional majors, solely for the purpose of attracting students to the relevant higher education institution."
Understand the command-administrative determination of which university has the right to offer which major
This is something that is enshrined in the draft strategy for higher education, which will most likely become a reality.
My point of view: The market (as it is) has somehow found an equilibrium, and this measure would be a gross intervention. Nothing decent will come of the whole thing.
Your point of view: This is an improvement and an attempt to take the opinion of the market into account. There is no destruction of competition, but measures to limit waste.
Well, that's the essence of libertarianism. When you talk about the market, you're always talking about some kind of abstraction. However, when it comes to real life, you support "improvements". The reason - well, it's not a free market anyway, why not optimize it, improve it, limit it, etc.
@Toto5
"Your point of view: This is an improvement and an attempt to take the opinion of the market into account. There is no destruction of competition, but measures to limit waste."
It's quite impolite of you to first present me with some of the information and for me to judge based on it. And then to present me with the additional and nasty things (limiting competition as you say) and to hold me accountable for them, even though I didn't know them.
By the way, I've already asked you not to lump me in with the others, but you clearly need a libertarian to vent your anger on. I definitely don't want to be your punching bag, so until another time.