Nice article. This bit resonates:
I deliberately spent my college education taking the 101/intro courses in as many disciplines as I could manage.
I was very confused as to why my fellow college students did not do this -- they specialized way too early. And this was a "liberal arts college". Isn't learning the basics of every field what a "liberal arts education" is supposed to be *for*?
That article has an interesting list of models. I use many of these.
There are only two of them which I know to be actually outright false, and they're both from economics.
Comparative advantage is false. I looked at the historical record: there is no empirical evidence supporting the idea that comparative advantage actually exists between nations, and a lot of empirical evidence proving it completely false. The evidence is also against the existence of comparative advantage between firms. It might exist between individuals, who are much more severely time-limited, but I've seen no evidence of this either. (I did mention economics is a minefield of stuff like this.) *Absolute* advantage is another matter, as it's obviously true and there's lots of evidence supporting it -- the distinction between the two is very important.
Comparative advantage is the idea that if Tesla is better at building cars than everyone else by a huge amount, and better at building batteries than everyone else by a little but not by as much, then Tesla should outsource building batteries. It's nonsense.
Absolute advantage is the idea that Tesla should outsource anything where it's actually *worse* at producing them than the other guys. This, by contrast makes sense.
The description of trademarks, patents, and copyrights is also completely wrong. A proper understanding of patents and copyrights should be hung on the understanding of non-excludible goods, non-rival goods, and externalities, and it's known that patents and copyrights are very poor solutions to the problems which those have. Trademarks are a totally unrelated concept which is about fraud.
You inspired me to make my own list, since for me many of those models (like Hanlon's Razor) are actually branches hanging on even more generalized models (like the Standard Cognitive Biases). And I've got more of a superstructure than that list does.
Some of my top generic models right now are:
-- the catalog of standard cognitive errors from psychology. Check your beliefs and behavior against it to see if you're making one of 'em. Check *other* people's beliefs to see if *they're* making one of them.
-- trusting empirical evidence above theory or doctrine (the first principle of science; counteracts optimism bias, pessimism bias, confirmation bias, and pattern-seeking bias, among others)
-- testing your pet theory by trying to prove it wrong (the principle of the scientific *method*, IMO, designed to counteract confirmation bias); a theory where many people have tried very hard to find evidence to disprove it but can't is probably true
-- formal reasoning / formal logic (easy but oddly missing from a lot of people's curricula; counteracts many, many cognitive biases)
-- the power and pervasiveness of randomness (this counteracts the *pattern-seeking* cognitive bias, which is one of the most powerful cognitive biases)
-- correlation: it doesn't imply causation, but if it exceeds the statistical threshold for probably being randomness, then it indicates a likelihood of causation, reverse causation, or joint causation by a lurking variable; go through all four possibilities
-- evolution by reproduction, variation (by random mutation), and natural selection (this is incredibly useful well beyond biology; it's also highly counterintuitive to almost everyone, and mind-blowing when you really understand it)
-- the feudal model of society as a hierarchical network of personal trust & loyalty relations
-- the principle that past behavior is a predictor of future behavior (this comes naturally to most people, but brainwashing can mess people up on this one)
And a set specific to economics, where the standard courses are a mess:
-- the understanding that something is money because other people will accept it in payment
-- the fundamental trust basis of economic activity: people don't deal with people they distrust; and the resulting mechanisms of bank runs, demonetization, and currency collapse
-- the principle that the economy is never in equilbrium (this is very heterodox): leading to time series modeling
-- the four supply and demand principles, critically, *with the relationship to time* (the timeless "equilibrium" versions in most 101 courses are highly misleading):
---- if price of a good goes up, there is an incentive to supply more in *future* (vice versa if it goes down)
---- if price of a good goes up, fewer people will want to buy it in *future* (vice versa if it goes down)
---- if supply increases, there is an incentive for suppliers to lower the price in *future* (vice versa if it goes down), but they will put it off
---- if demand increases, there is an incentive for suppliers to raise the price in *future* (vice versa if it goes down), but they will put it off
-- market power: monopolist sellers can force prices up or cut off supply, monopsonists can force prices down or cut off demand
-- the basic understanding of the behavior of suppliers (this is not in standard economics 101 at all, though the facts are undisputed):
---- all suppliers want to be monopolists
---- if sales of a good drop, their first move is product differentiation, and their second move is advertising
-- the all-important theory of product substutition, which causes sharp, sudden, and total changes in behavior when prices cross over a threshold, and the associated theory of inferior goods
-- non-excludible goods, non-rival goods, and externalities, both positive and negative: situations where brainless markets make things worse for most people
-- informational asymmetries
-- the operation of banks (this is from MMT), which lend money and then borrow to cover it later (the time order is important)
-- the economic game theory experiment results regarding people's evaluation of fairness in different societies
-- the game theory experiment results and bird society studies regarding cheating vs. enforcement in societies
-- the principle of wealth concentration: market forces tend to accumulate wealth in a small number of people and impoverish everyone else; this can be demonstrated with statistical simulations
And a funny one specific to investing:
-- the efficient markets *theorem* (not the hypothseis), which says that if everyone has the same information, analyzes it equally well, and everyone has the same market power and markets are competitive, you can't beat the market. It's a correct theorem, but the evidence says people can beat the market, and do so frequently. Therefore, using the contrapositive, if you can beat the market, you need to have one of the following:
---- market power
---- more information than most people in the market
---- better analysis of said information than most people in the market
I've probably left out a lot of very important math stuff from that first list because I learned a lot of it very very young. I'd say the basics of math which everyone should know are:
-- symbolic logic (propositional, and first-order predicate including basic set theory)
-- formal systems, and the closely related concept of algorithms (named after al-Khwarizmi)... this is the language of mathematics
-- arithmetic on the integers, and the decimal system of notation
-- arithmetic on fractions
-- algebra (developed by al-Khwarizmi)
-- real numbers as an infinite converging sequence of approximations (a very tricky concept, actually)
-- arithmetic on the real numbers
-- geometry: 2d, 3d, and more-than-3d have to be learned separately (they use somewhat different parts of your brain)
-- analytic geometry, the most basic and critical relationship between algebra and geometry (developed by Descartes).
Analytic geometry trains your head to translate back and forth between algebraic and geometric representations of a problem, which is extremely useful (and is used constantly in all other scientific fields). Those are basically the only two types of representations ever used in mathematics (although you will find multiple alegbraic representations and multiple geometric represenations for a single problem). The algebraic and geometric representations are actually processed in wildly different parts of the brain -- algebraic in the verbal-processing centers typically, and geometric in the visual/spatial processing centers. You have to practice to link these together.
Once you get these, you have the mental framework to learn the rest of math.
Well, that was a fun excursion for a Sunday. I should go back to work now.
