Economics

"Britain, with the most completely socialized health system in the West, now spends the lowest fraction of GNP on health care of any major nation. There are frequent complaints of excessive waits for elective surgery and other inconveniences, but British citizens live slightly longer than Americans, on average, and our overall health conditions are comparable."

"The university is being called upon to educate previously unimagined numbers of students; to respond to the expanding claims of national service; to merge its activities with industry as never before. Characteristic of this transformation is the growth of the knowledge industry, which is coming to permeate government and business, and to draw into it more and more people raised to higher and higher levels of skill. The production, distribution and consumption of knowledge is said to account for 29 percent of gross national product, and knowledge production is growing at about twice the rate of the rest of the economy. What the railroads did for the second half of the last century, and the automobile for the first half of this century, may be done for the second half of this century by the knowledge industry; and that is, to serve as the focal point for national growth."

"The Gross National Product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile."

"Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans."

"(Archie and Mike are talking about the benefits of the USA)"

"I didn't care about the statistics in anything else. I didn't, and don't pay any attention to the statistics of the stock market, the weather, the crime rate, the gross national product, the circulation of magazines, the ebb and flow of literacy among football fans and how many people are going to starve to death before the year 2050 if I don't start adopting them for $3.69 a month; just baseball. Now why is that? It is because baseball statistics, unlike the statistics in any other area, have acquired the powers of language."

"It's crazy that America gives such a paltry percentage of its GNP to the starving nations."

"Even if we can never quantify [satisfaction or happiness]... as precisely as we currently quantify GNP,... perhaps it is better to be vaguely right than precisely wrong."

"... in economic political discussions there is a nearly infinite number of specific questions that may be asked. Besides the ones mentioned in section 3 consider for instance these: "Should we build a road between points A and B in the country?", "Should we promote investments that will give employment to many people, or should we on the contrary promote such investment which will save labour?"… "Should we put more emphasis on things that have up to now not been included in the statistical concept of the gross national product? For instance, should we try to avoid air-pollution and all the kinds of intoxications that may be caused by refuse and waste (a problem that must be studied in its totality as a problem of circulation of matter in society, much in the same way as we study interindustry relations in an input-output table)?“, “Should we assess economic value to an undisturbed nature?” etc."

"Keynes was chief economic adviser to the British government and largely responsible for keeping the British economy afloat at a time when more than half of our gross national product, and all of out foreign exchange, was being spent on the war. ...I was lucky to be present at one of his rare appearances in Cambridge, when he gave a lecture with the title "Newton, the Man." …Four years later he died of heart failure, precipitated by overwork and the hardships of crossing the Atlantic repeatedly in slow propeller-driven airplanes under wartime conditions."

"Macroeconomics deals with national aggregates like gross national product, employment, price levels, consumption and investment, money supply and demand, balance of payments, and so on."

"There was a plea from honourable Members relating to the need for formal Gross National Product figures. Such figures are very inexact even in the most sophisticated countries I think they do not have a great deal of meaning, even as a basis of comparison between economies. That other countries make use of them is not, I think, necessarily a good reason to suppose that we need them. But, although I am not entirely clear what practical purpose they would serve in Hong Kong, I am sure they would be of interest. I suspect myself, however, that the need arises in other countries because high taxation and more or less detailed Government intervention in the economy have made it essential to be able to judge (or to hope to be able to judge) the effect of policies, and of changes in policies, on the economy. One of the honourable Members who spoke on this subject, said outright, as a confirmed planner, that he thought that they were desirable for the planning of our future economic policy. But we are in the happy position, happier at least for the Financial Secretary where the leverage exercised by Government on the economy is so small that it is not necessary, nor even of any particular value, to have these figures available for the formulation of policy. We might indeed be right to be apprehensive lest the availability of such figures might lead, by a reversal of cause and effect, to policies designed to have a direct effect on the economy. I would myself deplore this."

"The computer field is intoxicated with change. We have seen galloping growth over a period of four decades and it still does not seem to be slowing down. The field is not mature yet and already it accounts for a significant percentage of the Gross National Product."

"I don't have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It is like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don't do that though. I don't use very many of those claim checks. There's nothing material I want very much. And I'm going to give virtually all of those claim checks to charity when my wife and I die."

"Several alternatives to Gross Domestic Product have been proposed, and each tackles the central problem of placing a value on goods and services that never had a dollar price. The alternatives are controversial, because that kind of valuation creates room for subjectivity – for the expression of personal values, of ideology and political belief....It’s admittedly difficult to set a dollar price on such things – but this is no reason to set that price at zero, as gross domestic product currently does"

"To begin with, Gross Domestic Product excludes a great deal of production that has economic value. Neither volunteer work nor unpaid domestic services (housework, child rearing, do-it-yourself home improvement) make it into the accounts, and our standard of living, our general level of economic well-being, benefits mightily from both. Nor does it include the huge economic benefit that we get directly, outside of any market, from nature. A mundane example: If you let the sun dry your clothes, the service is free and doesn’t show up in our domestic product; if you throw your laundry in the dryer, you burn fossil fuel, increase your carbon footprint, make the economy more unsustainable — and give G.D.P. a bit of a bump."

"Creative destruction can apply to economic concepts as well. And this downturn offers an excellent opportunity to get rid of one that has long outlived its usefulness: gross domestic product. G.D.P. is one measure of national income, of how much wealth Americans make, and it’s a deeply foolish indicator of how the economy is doing. It ought to join buggy."

"Economics also succeeded in grafting onto the countries of the third world impressive theories and isolated important concepts such as gross national product, gross domestic product, and income per capita. These concepts served as building blocks with which economics constructed elaborate and impressive theories of development, including formula for predicting the rate of economic development of a given nation. According to economics, gross national product (GNP) is the total value of goods and services produced by a given country during a specified time period, such as a year. Gross domestic product (GDP), on the other hand, is gross national product minus the net income the nation earned abroad."

"We are consuming the past, present, and future of this biosphere, our only home, in an unthinking rush for profits and GDP that we call 'progress', belying our species name homo sapiens."

"For 60 years Gross Domestic Product, or GDP for short, has been the yardstick by which the world has measured and understood economic and social progress. However, it has failed to capture some of the factors that make a difference in people’s lives and contribute to their happiness, such as security, leisure,income distribution and a clean environment–including the kinds of factors which growth itself needs to be sustainable."

"Government [the US] is taking 40 percent of the GDP. And that's at the state, local and federal level. President Obama has taken government spending at the federal level from 20 percent to 25 percent. Look, at some point, you cease being a free economy, and you become a government economy. And we've got to stop that."

"We are misery-making machines! Homo sapiens has perfected the art of causing suffering. Pain is humankind's collective GDP."

"India needs to be liberated both from the 'high GDP growth hedgehogs' and the 'conservation at all costs hedgehogs.'"

"It costs governments money to keep fuel prices low. Oil-rich Yemen, for instance, devotes 9 percent of its GDP to making sure its people don't riot when oil prices rise. But the problem with cheap, subsidized fuel is that it creates more demand, and thus costs the governments more money. Countries like Iran, Yemen, Colombia, and Nigeria could go broke if they keep providing cheap gas to keep people happy."

"Simon’s conventionalism leads to a decision paradigm, according to which understanding problems of coordination is impossible without taking into consideration individual cognitive limits and social representations of reality."

"All that most economists know about Herbert Simon is that he wrote about bounded rationality and organizational behavior."

"The type of rationality we assume in economics — perfect, logical, deductive rationality — is extremely useful in generating solutions to theoretical problems. But it demands much of human behavior — much more in fact than it can usually deliver. If we were to imagine the vast collection of decision problems economic agents might conceivably deal with as a sea or an ocean, with the easier problems on top and more complicated ones at increasing depth, then deductive rationality would describe human behavior accurately only within a few feet of the surface. For example, the game Tic-Tac-Toe is simple, and we can readily find a perfectly rational, minimax solution to it. But we do not find rational “solutions” at the depth of Checkers; and certainly not at the still modest depths of Chess and Go."

"There are two basic ways market organization is brought about... Some combination of the two is usual the case:"

"# Strategic structuring, informal or formal, whereby social agents, including the state, establish a rule regime regulating market access and transactions..."

"# Emergent structuring, whereby participants discover or adopt certain similar strategies within bounded rationality and situations with certain opportunity structures and incentive structures. Social network and ecological properties result in relatively well-defined aggregate performance characteristics..."

"The term “bounded rationality” was coined in the 1950s by Herbert A. Simon."

"Models of bounded rationality describe how a judgement or decision is reached (that is, the heuristic processes or proximal mechanisms) rather than merely the outcome of the decision, and they describe the class of environments in which these heuristics will succeed or fail."

"One is forced to assume that ordinary people have the computational capabilities and statistical software of econometricians."

"Although contributions of many writers have helped the rise of behavioral economics including psychologists Kahneman and Tversky, I regard the works of George Katona and Herbert Simon instrumental in its rise. While the works of Katona and his colleagues at Michigan University led to the use of survey method in economics and its utilization in measuring the impact of consumer expectations on macroeconomic activity, the work of Simon at Carnegie Tech. (a tremendously stimulating intellectual environment for economic theorizing then) resulted in the important theoretical foundations of behavioral economics, such as the concept of bounded rationality."

"Two types of conventions [ in organizational settings] may be distinguished here: (a) conventional rules of behavior demonstrated in the classroom mental experience (first part of the story) and (b) conventional representation of the world revealed in the following discussions with ‘‘experienced” friends (second part)."

"Bounded rationality means that people make quite reasonable decisions based on the information they have. But they don't have perfect information, especially about more distant parts of the system. [...] We don't even interpret perfectly the imperfect information that we do have, say behavioral scientists. [...] Which is to say, we don't even make decisions that optimize our own individual good, much less the good of the system as a whole."

"In a fundamental sense, Alchian's theory of economic organizations is different from those of Coase or Simon. He disavows an explicit model of individual choice... and... offers a system-level explanation of organizational emergence, structure, and survival that is largely independent of decision making at the micro level... Yet it is precisely this independence of a distinct model of choice that ultimately renders it compatible with the individualistic theories of both Coase and Simon...."

"Around 1958, I became aware of H.A. Simon's seminal papers on bounded rationality and was immediately convinced by his arguments. I tried to construct a theory of boundedly rational multi-goal decision making. Together with Heinz Sauermann, I worked out an "aspiration adaptation theory of the firm" which was published as a journal article in 1962... More and more I came to the conclusion that purely speculative approaches like that of our paper of 1962 are of limited value. The structure of boundedly rational economic behavior cannot be invented in the armchair, it must be explored experimentally."

"The principle of bounded rationality [is] the capacity of the human mind for formulating and solving complex problems is very small compared with the size of the problems whose solution is required for objectively rational behavior in the real world — or even for a reasonable approximation to such objective rationality."

"Broadly stated, the task is to replace the global rationality of economic man with a kind of rational behavior that is compatible with the access to information and the computational capacities that are actually possessed by organisms, including man, in the kinds of environments in which such organisms exist."

"… I shall assume that the concept of ‘economic man’(...) is in need of fairly drastic revision, and shall put forth some suggestions as to the direction the revision might take."

"The problem can be approached initially either by inquiring into the properties of the choosing organism, or by inquiring into the environment of choice."

"Both from these scanty data and from an examination of the postulates of the economic models it appears probable that, however adaptive the behavior of organisms in learning and choice situations, this adaptiveness falls far short of the ideal of ‘maximizing’ postulated in economic theory. Evidently, organisms adapt well enough to‘satisfice’; theydo not, in general, ‘optimize’."

"A comparative examination of the models of adaptive behavior employed in psychology (e.g., learning theories), and of the models of rational behavior employed in economics, shows that in almost all respects the latter postulate a much greater complexity in the choice mechanisms, and a much larger capacity in the organism for obtaining information and performing computations, than do the former. Moreover, in the limited range of situations where the predictions of the two theories have been compared (...), the learning theories appear to account for the observed behavior rather better than do the theories of rational behavior."

"The first consequence of the principle of bounded rationality is that the intended rationality of an actor requires him to construct a simplified model of the real situation in order to deal with it. He behaves rationally with respect to this model, and such behavior is not even approximately optimal with respect to the real world. To predict his behavior we must understand the way in which this simplified model is constructed, and its construction will certainly be related to his psychological properties as a perceiving, thinking, and learning animal."

"In Administrative Behavior, bounded rationality is largely characterized as a residual category — rationality is bounded when it falls short of omniscience. And the failures of omniscience are largely failures of knowing all the alternatives, uncertainty about relevant exogenous events, and inability to calculate consequences. There was needed a more positive and formal characterization of the mechanisms of choice under conditions of bounded rationality... Two concepts are central to the characterization: search and satisficing."

"If (...) we accept the proposition that both the knowledge and the computational power of the decision maker are severely limited, then we must distinguish between the real world and the actor’s perception of it and reasoning about it."

"In the literature of problem solving, the topic I am now taking up is called "problem representation." In the past 30 years, a great deal has been learned about how people solve problems by searching selectively through a problem space defined by a particular problem representation. Much less has been learned about how people acquire a representation for dealing with a new problem—one they haven't previously encountered."

"Information impactedness is a derivative condition that arises mainly because of uncertainty and opportunism, though bounded rationality is involved as well. It exists when true underlying circumstances relevant to the transaction, or related set of transactions, are known to one or more parties but cannot be costlessly discerned by or displayed for others."

"Inflation is elevated, largely reflecting factors that are expected to be transitory. Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors"