04
Mar
2015
Potpourri
==> Chase Chandler writes on Nelson Nash, Mark Spitznagel, and Nassim Taleb. (BTW at the Nelson Nash Institute YouTube channel, you can see my extended interview with Nash, if you don’t know of him.)
==> I’ve asked on Facebook but the people there didn’t really answer my specific question. Does anyone know, do the Wonkette contributors all have a log-in and it’s decentralized? Or do the people running Wonkette consciously run the articles on the site? I ask because I want to know if they were cool with this piece about Sheriff Mack’s medical bills.
==> Gene Callahan and I checked the calendar and realized that it was time for our monthly brawl.
On your brawl with Gene….
You say:
‘what they actually wrote was, “Behavioral economics implies that teams favor players chosen in the lottery and first round of the draft because of the greater financial and psychic commitment to them.”
So that makes perfect sense: Behavioral economics has found a bunch of situations where sunk costs affect current actions (apparently), and in the setting of professional sports this approach would imply blah blah blah.’
But the study that Gene references shows that the NBA does not factor in such sunk costs The statement “sunk costs affect current actions” is not true for the NBA (according to the study).
So how can an empirical science that finds that the NBA does not factor in sunk costs imply that teams actually DO factor in such costs ?
Transformer, the two sentences from the abstract are:
“Behavioral economics implies that teams favor players chosen in the lottery and first round of the draft because of the greater financial and psychic commitment to them. Neoclassical economics implies that only current performance matters.”
So in physics the analogy would be:
Newtonian mechanics implies that the orbit of Mercury would be such-and-such, while Einstein’s general relativity implies it would be so-and-so.
Then the paper summarizes their observations of Mercury to render an opinion on which framework is right.
OK?
Well, if they had just said “Behavioral economics implies that people in general factor in sunk costs most of the time” , then that may be true (though I might quibble with the “implies” as “predicts” might be more accurate )
But it’s a stretch to say: “Behavioral economics implies that teams favor players chosen in the lottery and first round of the draft because of the greater financial and psychic commitment to them.” when there may be many factors specific to the NBA that behavioral economics has never actually considered, or has considered but was not known to the people who wrote the paper
Its a bit like saying “Newtonian mechanics implies that the orbit of Mercury would be such-and-such even after the sun starts to becomes a black hole” , when Newtonian mechanics may well not apply to that scenario, or if applied would show that in these circumstances the orbit would not be such-and-such.
To state it differently:
If Behavioral Economics implies that all people in all situations and at all times factor in sunk costs then it would be logical to conclude that this must apply to the NBA too.
But Behavioral Economics probably implies something much more woolly like “most people, in most situations and at most times factor in sunk costs”. This does not allow you to conclude that Behavioral Economics implies that sunk costs must be a factor in the NBA.