The U.S. Goverment

[jorb]

Calling others irrational just because you bid like an idiot doth not an economic problem make.

[pyrale]

"Pure theory of the market"? "Rational actors"? What are all these theoretical concepts you refer to?

"pure theory" was pointing to something that doesn't implement facts and testing (aka praxeology ).
About what a rational choice theory is, I guess you can find some infos on it yourself. Hint : your favourite libertarians use it alot.

So? What you are describing isn't "irrational behavior", it is on the contrary quite rational behavior. Since the participants have no idea of what bidding method the other parties will be using, nor for that matter any guarantee that their (or their own) value preferences will remain static for the duration of the auction, they rationally allow the bids to creep upwards with the most intense bidding not seldom taking place near the end of the auction time, when the opportunity cost for not bidding starts to increase. During the time the auction takes place there are a million things that could happen which would change the participants' valuations of the auctioned object, or of the money they plan to exchange for it -- their house might burn down and they might then need the money to rebuild that, they might discover another more interesting object, they might end up in a wheelchair and have no use for the skis that they were attempting to buy. Placing "the highest possible bid" (as if that were a static factor) when the opportunity cost for doing so is at its highest (when there is still plenty of time left) is the direct opposite of rational, economic behavior. But since it doesn't matter: Do you seriously begin your analysis of economic behavior by thinking idly about an entirely trivial auction dilemma?

You are going a bit too far with trying to find explanations. The basic reason is that usually, people auctioning on ebay don't really know how much they want to bid on something. Afaik it's not external changes that influence their valuations.

And yes, I start by showing how "sound theories" are defeated even by very simple examples to explain that praxeology applied to economy is either a complexity nightmare or a scam.

[jorb]

"pure theory" was pointing to something that doesn't implement facts and testing (aka praxeology ).

Testing implies that there is a theory to be tested. Facts cannot be interpreted at all without some sort of theory or hypothesis. Are you trolling?

About what a rational choice theory is, I guess you can find some infos on it yourself. Hint : your favourite libertarians use it alot.

My point seems to have gone completely over your head. I pointed out that you obviously can't discuss the subject without theoretical terminology. No, my favorite libertarians do not use the concept a lot.

The basic reason is that usually, people auctioning on ebay don't really know how much they want to bid on something. Afaik it's not external changes that influence their valuations.

My point was precisely that there are a myriad of reasons why your alleged super-problem wasn't a problem to begin with, that it offers no insights into economic fundamentals, that a theory of economic fundamentals is required to present the problem to begin with, and that a rational theory of economic fundamentals has no problem of explaining why the actors in an auction situation act the way they do, kind of like I just did.

Bidding early implies paying a higher opportunity cost. Cost-aversive behavior tries to minimize the opportunity cost. It's entirely trivial.

And yes, I start by showing how "sound theories" are defeated even by very simple examples to explain that praxeology applied to economy is either a complexity nightmare or a scam.

Dude, seriously, what are you even talking about? What is it that you believe you have shown? You haven't shown shit except your own poor understanding of the problem you yourself presented.

[pyrale]

Testing implies that there is a theory to be tested. Facts cannot be interpreted at all without some sort of theory or hypothesis. Are you trolling?

I'm saying, precisely, that the happy economists building models end up with an economic model which is either oversimplified, or uncomputable.

Bidding early implies paying a higher opportunity cost. Cost-aversive behavior tries to minimize the opportunity cost. It's entirely trivial.

I think you misunderstood me. Even without opportunity cost, my statement remains true since auction snipers are not used to delay the choice. I guess you misunderstood their purpose if you think they're used for that.

Calling others irrational just because you bid like an idiot doth not an economic problem make.

Yeah, using auction theory = bidding like an idiot.

[loftar]

Testing implies that there is a theory to be tested. Facts cannot be interpreted at all without some sort of theory or hypothesis. Are you trolling?

I'm saying, precisely, that the happy economists building models end up with an economic model which is either oversimplified, or uncomputable.

But noone ever tried to model the market in its entirety. Except the communists. Which is why communism failed. The welfare state tries to do it in part, and fails just as spectacularly. Only because it leaves part of the market to the individual does it not fail as quickly as communism.

The whole point of classical and Austrian economics is precisely that that is impossible, and therefore also, by extension, that central planning is impossible, which is the reason why planning should be left to the individual.

Of course, the fact that the market in its entirety cannot be modeled does not entail that specific phenomena, such as the "trade cycle", certain factors in price determination, and the often misinterpreted "invisible hand", cannot.

Yeah, using auction theory = bidding like an idiot.

Please cite the source of this "auction theory".

EDIT: I'm left wondering what you're trying to argue with it. You seem to be picking some obviously faulty theory, demonstrate that it doesn't work, try to point out that it is an "economic theory", and therefore conclude that the whole field of economics must be faulty and barren. If you intended for something else to be read into your words, please expound it, for I do not see it.

[Potjeh]

Testing implies that there is a theory to be tested. Facts cannot be interpreted at all without some sort of theory or hypothesis.

It's not a theory till it's been tested, just a hypothesis. And I wouldn't stake the well-being of the nation on a mere hypothesis

[pyrale]

But noone ever tried to model the market in its entirety. Except the communists. Which is why communism failed. The welfare state tries to do it in part, and fails just as spectacularly. Only because it leaves part of the market to the individual does it not fail as quickly as communism.

The whole point of classical and Austrian economics is precisely that that is impossible, and therefore also, by extension, that central planning is impossible, which is the reason why planning should be left to the individual.

Of course, the fact that the market in its entirety cannot be modeled does not entail that specific phenomena, such as the "trade cycle", certain factors in price determination, and the often misinterpreted "invisible hand", cannot.

Creating laws is a way to build a model. Invisible hand for instance, is a theory and not a phenomenon. It's actually quite criticized as it doesn't effectively model the behaviour of markets. While it may be validated in some instances, it still needs to be generalized to be used effectively.
My problem with some followers of praxeology is that they build theories following logic, and -because it's using logic and makes sense-, they think that their theories does not need empirical validation.

The auction theory is a branch of theory of games, and it is quite interesting.
My ebay example tried to show how logical theories failed at modeling real facts. The theory is still interesting (it is actually quite useful, for other purposes). However, it's prerequisites are not met because most ebayers are not rational. Therefore, people have to develop new theories.
So why am I talking about it ? Simply to show how logical theories does not necessarily correctly model reality, and how the classic case studies are still effective to find new theories there. I think this is a pretty legit example of how praxeology shouldn't be as iconized as (apparently) Jorb does and how it fails miserably when you skip the empirical validation.

Another interesting thing in this example is that it breaks the myth of rational economic actors. This and the refusal of most economic libertarians to acknowledge externalities are in my opinion the most problematic points of liberal market theories.

[Jackard]

This thread is sole TL;DRs...

haha damn

[SacreDoom]

Guess I made a fool of myself there.

[Tonkyhonk]

im getting lost here. could go nitpicking, but may need some new baits

http://online.wsj.com/article/SB1000142 ... 24854.html