AOC, Smith and the Invisible Hand

AOC says she likes Adam Smith and discussion ensues https://mobile.twitter.com/BenjaminNorton/status/1376263604584976388

Is Adam Smith the capitalist forefather that unveiled to us the Invisible Hand, she decides who stays low or climb high (said with the voice of those green critters in You Story

Bad news, Adam Smith only used the I.H. expression 3 times in his books, two of them he used it to make fun of old things, the 3rd stuck but we are not sure that was not sardonic either

So let us forget the interpretations that piled up over the centuries, let us go and read him like Chomsky did https://mobile.twitter.com/paleofuture/status/1376378264575299591

You got to read the classics especially when the times are achanging

Startups stock options homoploutia

Questo è un link che ti aiuta a decidere quante stock options dare alle persone che lavorano nella tua startup.

https://www.indexventures.com/optionplan/#pre_funding_valuation=7000000&initial_amount_raised=500000&expected_funding_rounds_pre_exit=seed-only&employee_country=italy&option_allocation_level=1&technical_dna=5&mode=seed

se sei dall’altra parte, quella di ricevere un’offerta da una startup, a questo link puoi trovare dei riferimenti su quanto farti pagare quante opzioni chiedere a seconda dello stage della startup

nei tempi che viviamo non c’è più la netta differenza tra lavoro e capitale, tra lavoratore e imprenditore nell accesso a redditi da capitale, il modo migliore per affrontare la vita è quella di lavorare per avere delle quote di azioni del posto in cui lavori

Questo fenomeno di crescente sovrapposizione tra il ruolo di lavoratore e capitale, si definisce homoploutia. il termine è stato coniato dall’economista Branco milanovich ed è giusto conoscere il fenomeno per capire come funziona la distribuzione del reddito la disuguaglianza nel mondo attuale.

https://mobile.twitter.com/BrankoMilan/status/1339956804604874752

Questo è uno dei motivi per cui mi fa piacere lavorare con te al progetto di imparare a conoscere i mercati finanziari e gli investimenti

Progressivism

Progressiv-ism, -ism like in Illumin-ism which followed the dark ages, Progressivism comes after the Great Depression. The Great depression is the title of the book written by the economist Tyler Cowen. Tyler and the tech entrepenuer Patrick Collison, founder of Stripe, have started the filed of “Progressive Studies”. They did so when they wrote the piece “we need a new science of progress” https://www.theatlantic.com/science/archive/2019/07/we-need-new-science-progress/594946/ and now there is a page where you can check a lot of contributions to it https://patrickcollison.com/progress

Oh, in there, Zuck interviews Tyler Cowen and Patrick Collison. Zuckerberg looking at things, interviewing things https://about.fb.com/news/2019/11/a-conversation-with-mark-zuckerberg-patrick-collison-and-tyler-cowen/

TFP (total factor productivity, what the hell is it)

Preview(opens in a new tab)

“For centuries, remember, Italians looked up in wonder at the cupola of the Pantheon, the arches of the dry aqueducts, and wondered how they had been built. ” https://johnhcochrane.blogspot.com/2021/03/europe-productivity.html

Things that depresses TFP, for future reference. TFP is often quoted as the problem but really seems an epiphenomenon. From Noahopinion https://noahpinion.substack.com/p/answering-the-techno-pessimists-part-275

A critique of TFP that I shoiuld read https://growthecon.com/blog/BLS-TFP/

Also, TFP as a proxy of economic success, ameasure of ignorance (cit Moses Abramovitz) Wgy do countries differ in TFP? https://selimraihan.wordpress.com/2016/05/02/why-do-countries-differ-in-total-factor-productivity/amp/

Storia invece di multiverso

esci dalla facoltà di economia con l’idea che l’uomo economoco è razionale e su questa razionalità l’economia non riesce a spiegare la cooperazione: l’uomo economico pensa solo a massimizzare la propria utilità e lo fa pensando a se stesso

poi, 30 anni dopo, scopri che questo è così per come la teoria dell’utilità è stata formalizzata a partire dal1 8esimo secolo. Ogni decisione che l’attore razionale prende è autonoma da ogni altra, un attore razionale che fa molte scelte -per la teoria della utilità- lo sta facendo nei diversi universi di un multiverso. E’ la conseguenza di aver ipotizzato l’ergodicità, cioè l’omogeneità nel tempo per cui si può ipotizzare l’indipendenza degli eventi. Toglindo la storia dalla teoria ‘economia dell’utilità.

Invece se la storia la si rimette dentro, quello che decido oggi si “compund” su quello che ho deciso ieri e sarà la base del compound della decisione di domani, allora si ha una cosa come The Farmer Fable, dove il comportamento razionale, cioè quello che massimizza l’utilità, è la cooperazione e il pooling delle risorsa. Potere del compounding dell’utilità, della storia invece del Multiverso

https://www.farmersfable.org/

Questo nuovo approccio -in maniera poco chiara IMO- viene chiamato Ergodicity Economics, in realtà the economics che elimina l’assunto di ergodicità per arrivare a una descrizione piùrealistica dell’essere umano che investe e nel farlo elimina anche un po di paradossi che si sono presentati nella teoria tradizionale.

rationality and ergodicity

classical economics postulates a human being strongly rational and developed the Expected Utility Theory for decisions in regime of uncertainty.

I got out of my economics study last century with the rather strong faith conviction that the basis of rationality in economic behaviours makes impossible to justify cooperation on rational ground.

And really it was not just me, some people had to build ad hoc theories to justify cooperation in terms of social capital, while some other simply took to show how the rationality hypothesis of human behaviour is really not grounded in reality, so behavioural economics is born and “people are “dumber and nicer” and more human compared to “econs” described in graduate economics texts”

Then lately I discover something funnily named ergodicity economics, got confused and took me a while to understand that it really describes a non-ergodic economics, models where the the ergodic hypothesis which is implicitely made in the Expected Utility Theory is abandoned.

A non-ergodic model better describes the economics and financial world and such model can retaina stronger definition of individual rational and has better chances to rebuild economics than chipping it away with the nudges criticism.

Utility Theory was built in the 18th century based on this “mistake” to think probability additive, made of independent events, while in reality, wealth accumulates over time and therefore when you consider probability of betting it becomes multiplicative, you have the St.Petersburg Paradox and maybe a cascade of consequences that brigns to my “rational man cannot cooperate” belief in university carried over to last here. Then I met the Farmers Fable and I got to love ergodicity economics (which is, a new foiundation of economics on non-ergodic pillars)

UPDATE march 22, 2021. Higher up I write “I got out of my economics study last century with the rather faith conviction that the basis of rationality in economic behaviours makes imposible any cooperation” but I cannot remember precisely which part of economic theory gave me this impression. Today, searching, I got to this paper of AMartya Sen “RATIONALITY AND UNCERTAINTY” http://homepage.sns.it/hosni/lori/readings/Sen%20-%201985%20-%20Rationality%20and%20uncertainty.pdf

The self-interest approach is crucial to the derivation of certain central results in traditional and modern economic theory, e.g., the Pareto optimality of competitive equilibria. / The traditional theory of utility provides a seemingly firm basis for the rationality of pursuing one’s utility – defined either in terms of Benthamite hedonism of pleasure calculus, or in terms of various formulations of desire-fulfilment. In fact, ambiguities in the concepts of ‘utility’ and ‘preference’ have played quite a substantial part in intermediating between self-interest and choice, giving the appearance of tying rational choice firmly to the pursuit of self-interest”

and elsewhere I guess trouble got crystallised with Samuelson formalisation, Samuelson considered ergodicity essential to make economics scientific (citation neeeded)

citation found, apparently Samuelson once said that economics can’t be scientific if you drop the erogodic assumption https://rwer.wordpress.com/2013/02/12/ergodicity-the-biggest-mistake-ever-made-in-economics/

and here https://larspsyll.wordpress.com/2012/08/07/paul-samuelson-and-the-ergodic-hypothesis/

shaky foundation of economics

still on the issue of the cancelled singularity

a dinner chat between a physicist and an economist on the physical limits to infinite growth , the infinite growth postulated by economists in their models.

I got there from this tweet on ergodicity economics https://twitter.com/DrCirillo/status/1201782869712146432

and gave another read to Ole Peter’s Nature paper which sinks deeper in my reasoning on economics.

It all started because some economist on Facebook complained that some other economist had opposing views, but this is not the point, he started with an “in science, no economic theory …” science and economics so close in one sentence got me thinking about epistemics

a comprehensive article on “is economics a science?” lots of quotes so probably it isn’t you would not need so many instead

EDIT: I found today Noah Smith arguing that economic policy today seems limited to “Give poeple money” without any attempt to ground the directive in theory, unlike what happened in 2008 crisis where economists resorted to theory and in course they wrecked the economy even more. So the state of economics, macroeconomics I mean, is dismal https://noahpinion.substack.com/p/the-new-macro-give-people-money

efficient markets, or not

on askblog I read of Fama efficient market hypothesis and monetary policy https://www.arnoldkling.com/blog/finance-theory-and-the-fed/

he says that “Actually, the central banks don’t do anything real. They are issuing one form of debt to buy another form of debt. If you are an old Modigliani–Miller person the way I am, you think that’s a neutral activity: You’re issuing short-term debt to buy long-term debt or vice-versa. That’s not something that should have any real effects

I should study the Efficient Market hing. It also prompted me to punt on reading list Mandelbrot The (Mis)Behavior of Markets https://www.goodreads.com/book/show/665134.The_Mis_Behavior_of_Markets

things to grow

links on industrial policies

the feeling of not having any updated idea on industrial policies, other than the memory of being bad from uni times, is really nagging me. So here s some links

great Noah Smith 3d following Nobel Prizes starting on grwoth https://twitter.com/Noahpinion/status/1316777689697587201

here is a seminal paper “The return of the policy that should not be named” IMF free download https://www.imf.org/en/Publications/WP/Issues/2019/03/26/The-Return-of-the-Policy-That-Shall-Not-Be-Named-Principles-of-Industrial-Policy-46710