Multidisciplinary Economics

September 11, 2012

Multidisciplinary Economics
Questions Week one about Jon Elster`s book Nuts and Bolts
9/11/2012 Student, 3834301 Marco Engler

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Multidisciplinary Economics

September 11, 2012

1 Introduction
Given were third teen questions about the first three Chapters of the book: Nuts and Bolts for social sciences ISBN: 978-0-521-37606-8 from the author Jon Elster. He has been a professor at Cambridge and has written this book in 1989 in style of Felix Klein`s book: Elementary Mathematics from an Advanced Standpoint. Jon Elster has wanted to publish his model as an introduction of the philosophy of the social sciences.

1.1 Questions
1. What does Elster mean with a mechanism? 2. Contrast explanations by mechanism with explaining by storytelling? What is the crucial difference, according to Elster? Do you agree? 3. Explain the difference between events and facts. Why are events, according to Elster, logically prior to facts? Explain. 4. Explain the difference between causation and correlation. Give two economic examples of correlation that do not entail causation. 5. Explain what is meant with the notion of a common cause. Discuss an economic example and an example for political science. 6. Elster only briefly mentions the role of statistics in social sciences. Relate the notion of tendencies to (numerical) statistics. 7. Explain the meaning of methodological individualism. Do you agree with Elster that it is trivially true to depart from methodological individualism in social explanations? Think about a counterexample. 8. Take a look at the three different schemes on p. 17. Describe in each case an example of your own to exemplify. 9. Try to explain in your own words Elsters example of strategic interaction on pp. 19 and 20. 10. Give a one sentence description of rational choice theory. 11. Explain what is meant with hedonism. 12. Rational choice is connected to notions of optimality. Explain. 13. Elster argues that other things being equal, a decision is likely to be better the more evidence we gather and the longer we deliberate (p. 25). Do you agree? Explain your answer.

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Multidisciplinary Economics

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2 Answers
1. Jon Elster has described a mechanism of social sciences what empowered applicants to evaluate and analyse quite complex social phenomena. He has divided social phenomena into two groups: Events and Facts. The distinction between those is that there are streams of events which result in a certain fact. Moreover, events are caused by human actions physically and psychical as well. So, Jon Elster believes that there are several cogs and wheels which mesh to create certain but different events. 2. Explanation by mechanism differs from explanation by storytelling since storytelling offers a wide range of interpretation possibilities within a story (and might imply uncertainly based facts). As a result of that, storytelling is more or less conjectural and not bound to real facts. Stories are mostly told with a subjective and personal approach. However, it contradict his behave of simplify his own stories and theories respectively by doing it in exactly the same manner. Even if he states that these stories would exclude very few other things However, he has written down the crucial story about a guy who died as a result of eating food. This implies most obvious that he died because he ate rotten food but the real cause could also be an allergy or a bullet. What would lead to another event and, hence, another fact. So, he is still dealing with the kind of storytelling to underline his point of view. I am agreeing with his explanation since it leads to evaluate stories and solves complex contexts. However, this story cannot imply all possible facts fact is not meant in the sense of his definition of this topic but it means cases. 3. As written under point 1, he means that every prior fact leads to another different event. In fact, this state of point is quiet philosophy as well. On one hand, it can be said that people`s decisions are made by destiny and on the other hand, it means that every decision directs one selves into another situation. In a nutshell, the fact that I was denied in an application process of an education by a government body leads to the event to write this assignment six years later. In other circumstances, I would have presumably never been a student gained different experience and dismiss other events independently whether good or bad. 4. At first, it should be considered that correlation means that events are (directly) connected and causation means the reason how events are connected together. Albeit, two things do not have to be caused as a result of each other, they could also be influenced by a third event. To put the explanation in an economic cohesion, the following example can be taken: The Second World War was caused by the arrangement of the First World War, the treaty of Versailles. The victorious powers have stroke some rules those have led in scarcity of the people in Germany within the 1920`s. This causation has correlated in a resistance of civilians and ignited the Second World War. Ironically, the Second World War has led to another period of scarcity after 1945. So, the correlation of scarcity in 1945 was connected to the end of the First World War. The major point is whether the scarcity after 1945 would have be caused if the colonialisation before the First World War would have taken place. The special point is Would the scarcity in Europe have been taken at the same time and would it have been taken in the same volume? The major issue of that scenario is that economic issues are always related to each other and predictions are actually impossible since there are no facts which ensure and empower the assumptions. This leads exactly to point three: causal explanation must be distinguished from assertions about necessitation. So, an event might happened in some other way then another event happened (or not), is neither here nor Page 3 of 5

Multidisciplinary Economics

September 11, 2012

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there. The second economic example is about agricultural development. In 1848, 82 farmers have founded the so-called Chicago Board of Trade or Commodity Futures Exchange in Chicago. By creating this board, the farmers have created the biggest area of agriculture cultivation in the Middle West. With this board, the farmers were able to predict prices even before resources were cultivated. 170 years later, the derivation exchange still exists and caused the financial crisis in 2008. Banks have lost a lot of money what have to be paid by governments and caused a vast governmental crisis mostly - located in Europe. It can be assumed that Greece would have the same problems without those market tools, because the development of the agriculture sector was necessary and enabled countries to expand. Common Causes means the circumstance that people are able and willing to act. So, the desire of in that case slave-owners to own slaves and the opportunities to get them comes together. John Sloman has stated in the book Essentials of Economics that the most important thing by acting is the status to A) be willing to do and B) be able to do. In a nutshell, it is important to be able to effort the desires. Thats the way how opportunities occur. An example of the political sector is, for instance, any kind of coalition. Political parties have the desire to govern and, according to the votes, they get the possibility to do so by an coalition. Even if coalitions comes mostly along with lowing one`s sights and as a result of it changing opportunities or desires. Statistics plays an important role by making decisions and human acting, since it helps to deliberate risks and chances. Furthermore, statistics shows how successful different possibilities could be and how necessary the tendency by making a decision is. If there are different opportunities with different independent or dependent outcomes an average utility can be chosen to minimize risks and, for instance, maximize the quality of a farmer`s goods. It leads to the fact to choose not the most obvious decision but the outcome what is tendency most economical. Methodological Individualism means a model which explains how individuals (which can be firms, governments, norms, social structures or societies as well) act among themselves. The model implies that all individuals are acting for their own interest to maximize their own benefits. The theorem simplifies all individuals to have the same directed intention without any account for individuals behave. Of course, models are used to analyse things in an eased point of view. Albeit, the main question should be: How many individuals are acting against this assumption and does their amount influence the whole picture enough? Jon Elster wrote later in his book, that people distinct from each other by the classes they are divided into and, thus, the possibilities which arise from their status. This assumption is completely opposed to the methodological individualism. Social explanations uses filters, methodological individualism not. Another aspect is the question whether the interest has really to be selfish. So, if an individual`s interest is to spend food to poor people or developing machineries to engender sustainability does the counterexamples still meet the criteria of methodological individualism and its implying focus of own interests? The first picture shows that the opportunity and the desire rise simultaneously to act. The second one shows that opportunities can influence and change desires to act and the last one illustrates that desires can influence opportunities to act. Example A can be illustrated by buying a car. If I get the money and the opportunity to buy a car, I can do so. Example B would mean that I get the opportunities to buy a car what convinces me to want to get a car and acting so. Example C shows, that I want to buy I can but I have to look for opportunities to act. These three ways can influence the circumstances of acting. If I am able and willing to Page 4 of 5

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10. 11. 12.

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buy I car the money does not play an important role (Example A). If I have the opportunities to buy a vehicle, I would be enabled to force a fair deal. Otherwise, it would not be desirable for me (Example B). Albeit, if I find it desirable to buy a vehicle and the opportunities are rare, then I would probably not consider of a fair deal (Example C). This leads to the state that the circumstances are depending on the kind of the way it occurs. Because opportunities, does not matter whether reachable or nor, build up desires. Jon Elster describes a situation in which two (or more) sides have to evaluate the own possibilities and the possibilities of the opponent and the current situations of both. The majority aspect is to evaluate own actions and predict actions of the opponent as well to reach the best outcome for oneself. Moreover, it is necessary to know and estimate the possible outcomes of all sides to minimise risks and avoid wrong rational decision making by choosing not the best opportunity. Rational choice theory means a weighing- up process by an individual to evaluate benefits and disadvantages for his or her own uses of a decision. Hedonism is an obsession of enjoyment that results in a deciding what can also be selfdestructive. By making a rational decision one of the most important things is to achieve an optimal outcome. People weighing up to find the best, independently what point of view is used, outcome. That does not means automatically the most productive way instance of producing goods. If the attitude of a producer is an optimal and high product the amount of outcomes does not play an important role. So, optimally decisions can be either qualitative or quantitative. I am agreeing. In general, it seems reasonable to deliberate and balancing benefits and disadvantages before taking a decision. In my mind, however, this process should not be measured or considered in terms of time it takes, but in the sort of thoroughly it will be done.

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