Within the constraints of GEM, a ‘better mousetrap’ is one that customers agree is better.
The best theory isn’t the one that most accurately predicts reality, it’s the one that the academics agree is best.
Just as situations change and the best mousetrap for securing a clay granary is not the best mousetrap for a nursery, the best theory is not constant over time- but when a new theory becomes best, it is coincident with it becoming the academic standard.
Within the constraints of GEM, a ‘better mousetrap’ is one that customers agree is better.
Within the constraints of GEM, a ‘better mousetrap’ is one that customers agree is better.
This is similar to saying “Within the constraints of GEM, it only counts as a $10 bill lying on the ground if people know it’s there. ”
The EMH, in theory, applies to the value people get from a thing, whether or not they know the value. It may be that there’s a mousetrap that makes it less likely other mice would come, and saves me money in the long run.
If I understood and believed that, I would buy the mousetrap no question, even though it’s more expensive. However, there’s a cost to educating me on top of the cost of just building the mousetrap.
The EMH has all sorts of weaknesses and holes, but the biggest weaknesses are around “innovation”—both finding new innovations, and propagating them through the marketplace. See the issues of asymmetric information, the innovator’s dilemma, etc.
In other words, I think @johnwentsworth was being too optimistic in his assessment: innovations of any kind will run into this issue, whether they have a market attached or not.
Mhmmm, I think we’re both in agreement that GEM is a good model neither for new mousetraps nor new scientific discoveries… The interesting question for me is: Does the model break down in the same way for both?
For mousetraps, it has the implicit problems with ignoring the effects of marketing on customer decision.
For academic theories, it has the implicit problem where the *consumers* (the scientific community, which is presented with multiple theories and forms a consensus around zero or more of them) is being misstated as the producer.
You can get paid for seeing an error in someone’s mousetrap design and making a design that lacks that error, even if the error is “bad marketing”. You can’t get paid for seeing an error in a mousetrap buyer, especially if that error is “ignores the exemplary marketing or otherwise makes decisions based on the wrong factors”.
Academia pays in prestige, but it doesn’t pay in prestige for “doesn’t join or change the consensus”; it pays a little bit to join the consensus and a fair bit more for publishing results that change the consensus, but joining it is much easier than changing it.
Is someone has a theory that’s badly marketed in academia, you can earn in prestige for appropriating the theory and pushing it with better marketing/framing.
Within the constraints of GEM, a ‘better mousetrap’ is one that customers agree is better.
That they agree to be better before they actually use it. Plenty of customers buy microwaves with a lot more programs then they end up using. It’s one of many examples of Norman’s Design of Everyday Things were companies produce devices that have poor useability.
If a microwave is built faulty in a way were it radiates the room around it and causes health damage, that’s a bad microwave but customers might not know about the problem.
The microwave that radiates it’s customers is similar to the flawed scientific theory that gets believed because an academic field lacks the mathematical abilities to see the theory as flawed.
Buying an academic theory by spending attention and reputation on it is just like buying a product with money. The buying decision depends in both cases on the qualities of the product that the recipients can perceive.
Yes, and to fit the lawsuit against the manufacturer of a faulty microwave or the journal retracting a flawed paper into GEM requires adding epicycles.
The problem with the mousetrap market, even under your framing of the problem, is that people are merely incentivized not to make incorrect decisions; there’s no way to profit off of other peoples’ poor choice of moustrap. Mousetraps are to financial markets as metaculus is to predictit. A better example would be the market for zero-day exploits; there not only are people incentivized to find exploitable bugs, but also to search under rocks other people are leaving unturned. Academia is simply that much worse than the mousetrap market, because in that case the real “consumers” are the engineers/randos who read and use the scientific literature to inform decisions, and scientists are poorly aligned with their needs.
The problem with the mousetrap market, even under your framing of the problem, is that people are merely incentivized not to make incorrect decisions, there’s no way to profit off of other peoples’ poor choice of moustrap.
Yes, this is certainly a big issue. However, there are other fundamental issues with innovation that it’s upstream of.
Take for example the scarcity of information. Under normal assumptions of markets if I do a poor job of marketing my product, someone else will step in to do that for me (profiting off of my ability to market combined with the knowledge that the product is more valuable). However, If I’m the only one that KNOWS about my product, that assumption breaks down. This applies to both new types of mousetraps and new theories.
In addition, if I had some sort of IP around the innovation it may mean that even if someone DID know about it, they would not be incentivized to spread it because I would get all the value. This is analogous to someone creating a theory and other scientists not being incentivized to spread it. As you said, this is a problem of misaligned incentives between the people who spread ideas/innovations and the people who get value from them.
There’s no way to profit off of people preferring to buy mousetraps that are lest effective at trapping mice because, in that framing, the best mousetrap is *not* the one that is most effective at trapping mice.
You also can’t profit off of people buying fake 0-day exploits, unless you’re selling the best 0-days.
Your tautologically efficient market is not what economists or anyone else in the world is talking about when they talk about a market being efficient. In the trivial sense you’re posing the problem you would describe your market as satisfying people’s needs even if people had parasitic worms in their brains that tricked them into thinking that mouse traps cured cancer. In the real world, people buy mousetraps because they *expect* those mouse traps to be more valuable than the price, for some definition of value that does not include “they bought the mouse trap”. A pillar of one such value system might be “effectiveness at catching mice”. In this scenario, people might be mistaken—they could have bounded rationality, they could have exploitable cognitive biases abused by advertisers, etc. The thing that makes financial markets resilient against this sort of problem is the nice property that rational actors are incentivized to take advantage of other peoples’ missteps. Mouse trap buyers cannot do this—you can’t buy a hundred mouse traps from an underrated dealer to correct the market, and you can’t short a mouse trap dealer’s traps because they are running deceptive advertising.
Within the constraints of GEM, a ‘better mousetrap’ is one that customers agree is better.
The best theory isn’t the one that most accurately predicts reality, it’s the one that the academics agree is best.
Just as situations change and the best mousetrap for securing a clay granary is not the best mousetrap for a nursery, the best theory is not constant over time- but when a new theory becomes best, it is coincident with it becoming the academic standard.
This is similar to saying “Within the constraints of GEM, it only counts as a $10 bill lying on the ground if people know it’s there. ”
The EMH, in theory, applies to the value people get from a thing, whether or not they know the value. It may be that there’s a mousetrap that makes it less likely other mice would come, and saves me money in the long run.
If I understood and believed that, I would buy the mousetrap no question, even though it’s more expensive. However, there’s a cost to educating me on top of the cost of just building the mousetrap.
The EMH has all sorts of weaknesses and holes, but the biggest weaknesses are around “innovation”—both finding new innovations, and propagating them through the marketplace. See the issues of asymmetric information, the innovator’s dilemma, etc.
In other words, I think @johnwentsworth was being too optimistic in his assessment: innovations of any kind will run into this issue, whether they have a market attached or not.
Yes, GEM does not permit there to be money on the ground. It’s one of the limitations of the model.
Which is a great reason to not use it to model situations where there is money on the ground.
Mhmmm, I think we’re both in agreement that GEM is a good model neither for new mousetraps nor new scientific discoveries… The interesting question for me is: Does the model break down in the same way for both?
No, and yes.
For mousetraps, it has the implicit problems with ignoring the effects of marketing on customer decision.
For academic theories, it has the implicit problem where the *consumers* (the scientific community, which is presented with multiple theories and forms a consensus around zero or more of them) is being misstated as the producer.
You can get paid for seeing an error in someone’s mousetrap design and making a design that lacks that error, even if the error is “bad marketing”. You can’t get paid for seeing an error in a mousetrap buyer, especially if that error is “ignores the exemplary marketing or otherwise makes decisions based on the wrong factors”.
Academia pays in prestige, but it doesn’t pay in prestige for “doesn’t join or change the consensus”; it pays a little bit to join the consensus and a fair bit more for publishing results that change the consensus, but joining it is much easier than changing it.
Is someone has a theory that’s badly marketed in academia, you can earn in prestige for appropriating the theory and pushing it with better marketing/framing.
Maybe we could remove some confusion by calling it “a more addictive mousetrap” instead? :D
That they agree to be better before they actually use it. Plenty of customers buy microwaves with a lot more programs then they end up using. It’s one of many examples of Norman’s Design of Everyday Things were companies produce devices that have poor useability.
If a microwave is built faulty in a way were it radiates the room around it and causes health damage, that’s a bad microwave but customers might not know about the problem.
The microwave that radiates it’s customers is similar to the flawed scientific theory that gets believed because an academic field lacks the mathematical abilities to see the theory as flawed.
Buying an academic theory by spending attention and reputation on it is just like buying a product with money. The buying decision depends in both cases on the qualities of the product that the recipients can perceive.
Yes, and to fit the lawsuit against the manufacturer of a faulty microwave or the journal retracting a flawed paper into GEM requires adding epicycles.
The problem with the mousetrap market, even under your framing of the problem, is that people are merely incentivized not to make incorrect decisions; there’s no way to profit off of other peoples’ poor choice of moustrap. Mousetraps are to financial markets as metaculus is to predictit. A better example would be the market for zero-day exploits; there not only are people incentivized to find exploitable bugs, but also to search under rocks other people are leaving unturned. Academia is simply that much worse than the mousetrap market, because in that case the real “consumers” are the engineers/randos who read and use the scientific literature to inform decisions, and scientists are poorly aligned with their needs.
Yes, this is certainly a big issue. However, there are other fundamental issues with innovation that it’s upstream of.
Take for example the scarcity of information. Under normal assumptions of markets if I do a poor job of marketing my product, someone else will step in to do that for me (profiting off of my ability to market combined with the knowledge that the product is more valuable). However, If I’m the only one that KNOWS about my product, that assumption breaks down. This applies to both new types of mousetraps and new theories.
In addition, if I had some sort of IP around the innovation it may mean that even if someone DID know about it, they would not be incentivized to spread it because I would get all the value. This is analogous to someone creating a theory and other scientists not being incentivized to spread it. As you said, this is a problem of misaligned incentives between the people who spread ideas/innovations and the people who get value from them.
There’s no way to profit off of people preferring to buy mousetraps that are lest effective at trapping mice because, in that framing, the best mousetrap is *not* the one that is most effective at trapping mice.
You also can’t profit off of people buying fake 0-day exploits, unless you’re selling the best 0-days.
Your tautologically efficient market is not what economists or anyone else in the world is talking about when they talk about a market being efficient. In the trivial sense you’re posing the problem you would describe your market as satisfying people’s needs even if people had parasitic worms in their brains that tricked them into thinking that mouse traps cured cancer. In the real world, people buy mousetraps because they *expect* those mouse traps to be more valuable than the price, for some definition of value that does not include “they bought the mouse trap”. A pillar of one such value system might be “effectiveness at catching mice”. In this scenario, people might be mistaken—they could have bounded rationality, they could have exploitable cognitive biases abused by advertisers, etc. The thing that makes financial markets resilient against this sort of problem is the nice property that rational actors are incentivized to take advantage of other peoples’ missteps. Mouse trap buyers cannot do this—you can’t buy a hundred mouse traps from an underrated dealer to correct the market, and you can’t short a mouse trap dealer’s traps because they are running deceptive advertising.
Yes. That is a limitation of the model.
No, it’s mot *my* model.
But within the model, marketing is one of the factors that determines the quality of a mousetrap.