Hot take on economics 

Hot take on economics 

Hot take on economics 

Hot take on economics 

Hot take on economics 

Hot take on economics 

Hot take on economics 

Hot take on economics 

Hot take on economics 

Hot take on economics 

Hot take on economics 

Hot take on economics 

Hot take on economics 

@freakazoid So, dynamics can turn up in various forms. I've tried (unsuccessfully) to catalogue the in the past.

There's fiat or imposed value, as with coin. Also with transjurisdictional standards, such as divorce law and shipping registries ("flags of convenience"). Whatever the *minimum* acceptable *somewhere* is, is acceptable *everywhere*.

There's effective perceived value -- Mencken's "Brayard", or consumer technologies, or bicycles.

@o @woozle

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@freakazoid Underlying quality is difficult to communicate, so some *quality indicator* is substituted. Accent. Vocabulary. Cultural myths. Clothing. Food. Table manners. Branding. Musical tastes. Books read. Schools attended. Management fads.

These signal *both* quality *and* group alignment -- and the wrong set can easily get you killed in many cases.

*Changing* signifiers is highly traumatic: culture wars and value shifts.

This also leads to cargo culting.

@o @woozle

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@dredmorbius @woozle @o These fall into a few different possibly overlapping categories: implicit bias, laziness or ignorance (because the information is available but people don't bother to look or don't know it's there), and places where it's genuinely hard to know, like interviewing and managing (though there's a lot we do know about management and interviewing so laziness and ignorance applies there).

...

@o @woozle @dredmorbius Volume also contributes to this a lot: for cheap things, the cost of research can be a significant fraction of the cost of actually buying it. This is probably why for many things there's not much of a "middle ground", just super cheap and super expensive things.

You can also get seemingly paradoxical effects where the brand with the better reputation has lower quality at a higher price point. I've noticed in general an inverse correlation between marketing and quality.

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@freakazoid Totally agreed on the cost-of-research factor.

The fact that this is very frequently *excluded* from economic analyses is one huge source of the fallacy of the sunk cost fallacy. That is: the *putative* sunk cost excludes a tremendous number of actual, but non-apparent costs. Which provide benefit, and must be re-invested when switching to another option.

Another case of the problem: information that's not manifestly evident.

@woozle @o

@dredmorbius @o @woozle Can you give an example of where it's excluded to the detriment of the conclusion? Since the sunk costs fallacy is widely known in econ circles, I would be surprised if it's being excluded in places where there's a significant effect.

One thing I don't generally hear when people are talking about human cognitive biases w.r.t. markets is how government avoids being affected by the same bias. The sunk costs fallacy, for example, is manifest in every large project.

@woozle @o @dredmorbius That's pretty interesting. It seems like the sunk costs fallacy might make more sense as part of public choice theory than behavioral economics. Speaking of which, I wonder to what extent public choice theory explains decisionmaking inside corporations and other organizations where there aren't prices?

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