So I take all these advanced math classes, and I dream about Banach spaces. I work my myself crazy for a PhD, and now this happens. A video has been posted on youtube(linked at Krugman's blog) that tears apart consumer theory. Any college economics student can follow this video, but it gets slightly more advanced at the end. This guy clearly knows economics, and he puts the viewer in a situation and then shows the implications. I have no reply for his critiques. I showed this to a some very famous Profs and I thought they might have a stroke. They were speechless also. Who is going to pay me to theorize if teens don't pay tuition to take principles and intermediate?
http://www.youtube.com/watch?v=2c4mvGekYZY
How am I supposed to teach econ class after the students see this video?
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5b24, although I only skimmed the video I can tell you what is wrong as he posted his main argument on youtube. Basically he says that consumer theory predicts that if someone had the choice between one high quality TV set and an infinite amount of low quality TV sets, a consumer will prefer the infinite amount of TV sets.
I admit that under the standard axiomatization of preferences (i.e. to obtain a utility representation), this is indeed the case. However, there is an example for a class of preferences which can explain the above behavior. Unfortunately it has no utility-representation. And where can you find this example? In the good-old Mas-Colell et al.
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5b24, although I only skimmed the video I can tell you what is wrong as he posted his main argument on youtube. Basically he says that consumer theory predicts that if someone had the choice between one high quality TV set and an infinite amount of low quality TV sets, a consumer will prefer the infinite amount of TV sets.
I admit that under the standard axiomatization of preferences (i.e. to obtain a utility representation), this is indeed the case. However, there is an example for a class of preferences which can explain the above behavior. Unfortunately it has no utility-representation. And where can you find this example? In the good-old Mas-Colell et al.yes Leontieff, it has a utilty representation just not a continuous utility epresentation
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Here is the video creators website now
http://alexgheg.com/Here is the video creater's website in 10 years;
http://www.timecube.com/ -
So what are quality and convenience? Can anyone show what they are with indifference curves? That's why I have no answer for him. We all have the same corner solution with the low quality TV, and it's true that one good TV is worth more than an infinite number of low quality TVs. In the quality papers, like Bils and Klenow, they use CES pref. Is it possible that one equation explains it all or is this some hoax?