RE: Marketing vs. Economics
I started as a market researcher 25 years ago; I have worked in 30 countries; I can testify that global marketing organisations have given up all clues as to what local people want. In different ways that's the message of http://www.wwdemocracy.nildram.co.uk/index.htm and www.cluetrain.com and www.nologo.org I am pretty sure that economics has also given up asking the basic questions : what organisations do people really want around them, which are they sensible to trust? , what systematically multiplies both our capabilities (learning, doing, inventing) as producers and as fussy customers? For example, this sort of question wasn't even on the radar of Bill Emmott's talk earlier this month on saving capitalism from itself. So in my view both subjects have veered alarmingly away from human common sense; whether that means they could rediscover this by uniting in a reappraisal of where they lost touch with trust and living systems and how knowledge networks are changing world markets is a moot question Chris Macrae, Bethesda, www.valuetrue.com Sample chapter available on request from me at [EMAIL PROTECTED] on our forthcoming book published by John Wiley on how to value transparency and trust-flow across organisational systems -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Robin Hanson Sent: 30 June 2003 14:27 To: [EMAIL PROTECTED] Subject: Re: Marketing vs. Economics On 6/25/2003, Fabio wrote: In economics, we are taught to think of people as utility maximizers. However, marketers tend to be much more cognitive in their approach to human behavior. People buy stuff as a result of a very contextual decision process. In the marketing world, decisions to buy stuff are triggered by cost and percieved benefits, what other people are buying and what people remember about a product ... it seems more simple to postulate that people have a set of rules that they apply to some classes of economic behavior. ... - Economists need to expand the repertoire of explanations. Economists should learn how to model rule-based behaviors and interactions with the same ease as they can calculate a Langrangian multiplier. Econ 101 should start with a speech saying how people sometimes apply rules to economic behavior and at other times they act like classical utility maximizers. Students will then learn marginal analysis and models that embody rules based behaviors. The usual response to someone ought to do X is why not you?. Introductory classes must meet a lot of constraints. They must prepare those who will continue in the tools that are actually used at higher levels. And they must give the rest some tools they can actually use to understand some phenomena around them. Yes, some people are having some success in explaining some kinds of behavior with rules, but such papers have hardly taken over the journals. And I'm somewhat at a loss to think of what particular rules I would teach GMU undergraduates to take up half of an Econ 101 class. Of course one could just grab material from current marketing 101 classes. But is learning to market really that important? Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Assistant Professor of Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030- 703-993-2326 FAX: 703-993-2323
Re: Marketing vs. Economics
On 2003-06-29, alypius skinner uttered to [EMAIL PROTECTED]: But would this really give us economic models more useful than the simplified ones currently used? Taking more factors into account may make the models so hard to maximize that there is no net gain in predictive accuracy. Thoughts, anyone? I think rules are already a large part of economic reasoning. I mean, what are game theory and institutional economics if not rule based econ? Also, there are plenty of mathematical tools which can be used to maximize even hugely complicated rule based models -- there's a lot of theory and software for finite automata, Markov models and the like. (Presuming maximization is a concept which fits easily with rules.) Even if solving such systems exactly is infeasible, numerical solutions would appear tractable across the board. So yes, I think rules might have their place. It's just that they probably won't be needed in easy, more or less competitive markets with money, but in inconventional ones like the marriage or public choice ones. (My first post, so I should probably introduce myself. I'm a 24-year old Finnish student of math and computer science. Economics is more or less a hobby to me, largely thanks to my libertarian political background. Armchair economics describes my interests perfectly: institutional econ, black markets, voting theory, market failures, the complications with IP rights, transaction cost economics, and so on. I'm looking forward to some interesting discussions.) -- Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111 student/math+cs/helsinki university, http://www.iki.fi/~decoy/front openpgp: 050985C2/025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2
Re: Marketing vs. Economics
The usual response to someone ought to do X is why not you?. Introductory classes must meet a lot of constraints. They must prepare those who will continue in the tools that are actually used at higher levels. And they must give the rest some tools they can actually use to understand some phenomena around them. Well, first, I am not an economist. Nothing much I say will be taken seriuosly by economists (aside from my friends who have to listen!). I do produce models of rule base behavior, but since they aren't published in econ journals, they'll probably have zero impact in economics. That's ok. That's just the nature of academia. But second, rule based modeling can easily be taught to undergraduates. For example, the Schelling model, as I pointed out in another post, could easily be taught and yeilds simple but important results. Yes, some people are having some success in explaining some kinds of behavior with rules, but such papers have hardly taken over the journals. And I'm somewhat at a loss to think of what particular rules I would teach GMU undergraduates to take up half of an Econ 101 class. Of course one could just grab material from current marketing 101 classes. But is learning to market really that important? I brought up marketing to make a slightly different point. I wasn't arguing that econ classes should become marketing classes. I was arguing that people whose profession is to predict economic behavior seem to do perfectly well without utility maximization theory. A lot of economic behavior seems to be well described by rules rather than searches for optimal behaviors. Couldn't this be a sign that we should consider a fundamental shift in the construction of economic theory? Could it be the case that economic behavior is a continuum? Some large classes of behaviors are probably rule based while others are the result of searching to optimal outcomes. I think the most interesting possibility is to think of some situations as combinations of rules based and classical economic actors (my example was voting - politicians= rational, voters = rule based). Or how about stock markets? Professional investors are probably closer to the rational actor than mompop investors. Small time investors seem to go on gut reaction rules, at leas many of the ones I talked to. How would our understanding of stock markets change if we thought that there was always a mix of rational and rule based actors? Fabio Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Assistant Professor of Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030- 703-993-2326 FAX: 703-993-2323
