Everything rests on people's behavior
distribution to fill human needs, is not just generated by natural resources
(an old interpretation that surges again as their demand grows and makes
some pundits entertain a fear of scarcity) and other hard factors.
A focus on physical and natural riches is understandable (*) but it neglects
largely that the economy is chiefly made by people:
* Either individually
* or via their organizations (**), such as businesses and some
(*) Solutions that aim only to restrict their use are an insult at :
* mankind, considered unable to find more creative solutions,
* markets that have their own natural tool to manage scarcity:
(**) No mystery here, this is obviously true in most social activities,
such as politics and community life.
Those economic players, operate as, to cite their main activities (and
focus on the law-abiding ones ;-)):
If for example we look at the production aspect, economic resultsProducers, workers, sellers, consumers, investors, borrowers,
taxpayers (or ...tax collectors)
can be quite different with the same generally available
basic resources, because of:
* the way those people / units use those resources for producing,
* what end-products they create and use,
* what still untapped resources they discover and can use.
- For a small part on the physical environment.
For the largest part on those people's behaviors.
taken into account, if possible from the start, when we make
economic anticipations and decisions, we might encounter :
* Not only near-mechanical extreme events / disruptions
* But also "soft" elements such as changes of players' attitudes.
In other words, the human factor is one of the main cause of economic
uncertainty, as it is difficult to forecast:
* How those "economic players" will behave
* What economic effects those behaviors will bring.
Can they be predicted?
The quest to understand motives ...and their biases
The economic behaviors of those players are driven by their
* Needs, preferences,
* Either instant or deep, pleasurable of painful
* Attitudes, either positive or negative, active or passive towards
some economic goods, operations or players.
* Cognition : knowledge and reasoning, conscious or
unconscious (neurons never sleep)
Various biases interfere, some occasionally, others recurrently, in their
Anyway economic rationality is a complex notion.
It cannot be reduced to "economic utility maximation" as some
classical economists stated.
Other goals, motives and interests than personal economic gains and
safety drive also people in their decisions, even their economic decisions.
In order to help economic prevision making (and if possible ...to give a few
tips that might prevent some economic blunders) a relatively recent field
of study called Behavioral economics (*) tries to identify:
- Those economic behaviors.
- Their associated motives (preferences...),
- Their most frequent types of decision biases.
- The overall economic incidences of those decisions / behaviors
Behavioral economics article
Consequences for economic models
their collective interactions, cannot be fully known in advance.
This is one of the flaws of purely statistical / probability (*)
(*) Of course probabilities give important data, and to neglect them fully
is a recipe for illusions but on the other hand their possible flaws or
drastic evolutions should be kept in mind.
=> This leads to different approach for economic models.
Therefore economic predictive models using sophisticated maths are
currently highly criticized if not derided.
They often rest too much on past data and
random laws (and other "mechanical" laws /
correlations that link economical data aggregates).
In our world in turmoil, no wonder holes can appear in those ideal
How to make those models more flexible?
An obvious trick is to include a range of various scenarios
that take into account "surprises" that escape such laws.
Another one is to use easy to adjust parameters.
The "big data" challenge
The new Grail? Or a perilous quest?
Big data crosses a huge mass of diverse informations, until then found and
used separately or as too short statistical series.
Big data can by the way infringe personal privacy
It might spot hidden trends / correlations, rare events and weak signals
It can bring some order, a better understanding within the
Thus it promises to help make much better previsions, to orientate
decisions more effectively.
On the other hand, human wisdom will stay more than ever crucial
* to make a sorting, to admit that an avalanche of diverse data does not
make the fundamental uncertainty disappear, that many decisons
will keep being bets on an unknown future.
* thus to
orientate / apply the big data researc and findings wisely and
creatively, not in a systematic / one-sided /
(extreme numeracy bias).
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