bump
as I was hoping anybody in general could reject or validate what I said here so I know if I have even the slightest hunch of what I’m talking about[:P]
i was looking for guidance from one of the learned of economics on this thank you[:)]
Yes, but the producer lives in the real world with real ramifications and a different incentive structure. He must produce what society wants, and when he fails to do so, his livelihood is put in jeopardy. The market doesn’t care about his excuses and BS. Furthermore, the facts come to him in the form of market signals, which he has to interpret. The economist, on the other hand, chooses a large sum of previous facts, and tries to induce/deduce other “facts” (assumptions). But because the economists incentive structure is entirely different (PhD’s in ivory towers and secured tenured positions) they get to create their own world with their own “facts.” Let me give you an example which may better explain what I’m trying to say.
When the would-be entrepreneur borrows capital and employs labor he takes a risk, in fact, the risk is usually quite large. If he fails to produce commodities which are desired by society, or if he can’t produce it as efficiently as his competitors (who use less resources for production), then he will go out of business and take an economic loss. He may also lose his wife, and the respect of his family members (the shame of being a failure). It doesn’t matter how nice this would-be entrepreneur is, or where he got his MBA from–the real world chooses his outcome. But, for example, when an economist like Samuelson, who is considered a God by the mainstream, says that there will be a great depression after WW2, or that the USSR will overtake the U.S as the worlds economic super-power by 1990, or that there is a real causal relationship between the level of employment and inflation, he is excused (they make excuses for him). He keeps his Nobel prize, and people thank him for his “revolutionary insights.” Now if a large segment of society was into economics, and if they read all of the literature and followed who said what, then the situation would be entirely different. Samuelson wouldn’t just face his Keynesian buddies, but the masses as well. Those who listened to him, and made financial decisions based on his theories (the shame alone would make him think twice), wouldn’t care about his excuses and apologies.
The systems/institutions are intrinsically (entirely) different.
(I suggested as answer by mistake).
thank you Esuric. That’s exactly what I was thinking, but you can elaborate the details much better than I. I may have left out the differences, which you contrasted here well, and I began to say it but went off-track when I mentioned the producer works in “real-time”. I go on to say an economist does as well, but how I shaped it in the end was the concept of economic subjectivism could be missing in the producer or economist when both blame the consumer. Whereas when it comes to working within the real world, as you put it, or “real-time” as I said, the producer upon reflection could realize the product is terrible and not the consumers tastes, so, blame the product not the consumer for not buying the product. As you say, the incentive system is totally different as the producer would necessarily need to be insightful enough to realize, ‘better change the product or else bad things will happen, ie. business failure, etc…’. Whereas an economist in the ivory tower can have terrible theories, and sometimes these theories act upon society in which society becomes simply a guinea pig, a lab to test theories, but what is missing again is the concept of economic subjectivism in which the economist can’t have the knowledge to know each and every choice of every consumer. But the economist isn’t working in the real world where his or her product can fail and have instant market signals point this out. It can drag on, mistakes can be made, and as you point out even get pats on the back for “revolutionary insights” that chase a fantasy that can’t be realized due to economic subjectivism (and probably due to other reasons as well but I’m not as knowledgeable about this but I think I realize at least that tid-bit).
thanks for getting back to me, that helped. I do think I have a grasp of what’s up, but I definitely don’t know the details and don’t know lots of the in’s and out’s - yet.
Yeah, the term “real world” is quite vague. But we’re on the same page.