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Do Countries Have Utility Function?

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genepool Posted: Sun, Apr 8 2012 1:39 AM

Homoeconomicus said that humans have utility function. What about countries?

In other word is there a utility function whose maximization correctly predict countries' behavior?

would a country's best interest (utility function) would be whatever correctly predict the country's action?

What does "American's utility" function mean if there are 200 million different americans that want different things? The interest of their swing voters?

If countries have no utility function, how do we analyze and predict countries' behavior?

This paper seems to talk about a country's utility function: http://www.jstor.org/discover/10.2307/1884588?uid=3738224&uid=2129&uid=2&uid=70&uid=4&sid=47698830804037

However, countries often behave that defy "it's interest". For example, how do we explain why so many countries complain about other countries selling stuff cheaper to them?

Also, countries, unlike most humans, do wage war and kill each other. Hence, just maxing out their GDP will not be the utility function.

Note: If countries have utilities function, we run into some issues. Some countries, like Turkey or Nazi Germany prosecuted their richest minority (armenians, jews). Does that mean genocide serve the country's best interest?

If utility function is defined as what ever correctly predict an object's behavior, then the answer is yes. Moreover, if utility function is defined as the objects' best interest, then yes it's to the best interest of most countries to prosecute their richest smartest minority.

This lead to a really bizarre and politically incorrect conclusion that holocaust actually serve Germans' best interest at that time because that's exactly what they did.

Another way to reach the same conclusion is to observe that the countries' interests are pretty much its ruling class interests. The interest of the ruling classes are often served by scapegoating more successful minorities.

Another sample. So many countries complain about other countries dumping goods to them. Dumping goods hurt the interest of democratic countries' ruling class because swing voters need job. So, even though the country economy is actually benefited by other countries dumping good, the whole country as a whole will behave differently.

The same way many countries have tough immigration laws to protect jobs for its' swing voters.

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No, not for Miseans anyway.  There is no way a country can act- and there is no way state apparatus can rationally determine utility

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Clayton replied on Sun, Apr 8 2012 2:39 AM

+1 vive

Kings, Presidents, Congressmen, lobbyists, judges, CEOs, wealthy industrial family patriarchs, etc. have "utility functions", that is, they valuate - they have a schedule of wants (remember, preferences are ordinal, not cardinal, in Austrian theory). I doubt there is much correlation between the "utility functions" of the Big Men and the "utility functions" of common citizens.

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genepool replied on Sun, Apr 8 2012 10:19 PM

Preferences are ordinal not cardinal. What does it mean?

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Jargon replied on Sun, Apr 8 2012 11:42 PM

When I prefer chocolate ice cream to vanilla ice cream, I do not do so because chocolate has 7 preference points whereas vanilla has 4. I do so because my ranking of preferences is thus: 1. Chocolate, 2. Vanilla. The valuations one makes do not assign numerical values to the preferences, they only exist in reference to other more or less preferred options. Ordinal - like a ranking from most favorite to least favorite. Cardinal - like a ranking from highest 'points' to lowest 'points'.

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genepool replied on Mon, Apr 9 2012 12:30 AM

So how do I compare a gamble where I can get chocolate at 50% probability compared to vanilla with 100% probability? Assuming my current utility is 0?

Of course any linear avine function would do.

Mises don't gamble a lot does he?

Why does austrian school so pro libertarianism anyway and what's the difference?

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Jargon replied on Mon, Apr 9 2012 12:52 AM

Dunno it's up to you. Do you choose vanilla 100% or chocolate 50%? The odds are relevant to your preferences only in how you choose. 

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While austrian economy is very good, the assumption is too weak. In classical economy, I know he will pick chocolate if probability is 50% but will pick vanilla when probability is 60%. If I can conclude something and yet I can't predict that, it sucks.

I also know that if I prefer vanilla over chocolate, I will prefer a gamble where I may get either vanilla or chocolate if the odd of getting vanilla is higher. I cna make that prediction in classical economy. I can't do that on austrian.

It's like will the sun rise tomorrow? I can predict that with classical common sense. In austrian, I will know it tomorrow. Well, c'mon? We know more than that now.

Are preferences even transitive in austrian?

In classical economy, if we know that someone will pick vanilla over chocolate, we will also know that he will pick a gamble where he can get vanilla with higher probability than chocolate.

It's a balance game.

Assumptions that are too strong leads to false conclusion. Assumptions that are too weak are not that great either.

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Clayton replied on Mon, Apr 9 2012 4:05 AM

Preferences are not probability statements, they are rankings that are only valid for the individual doing the ranking at the particular time and place at which he is ranking. I can eat nothing but vanilla ice cream to this moment, then eat nothing but chocolate ice cream for the remainder of my life.

Mises on probability. The only defect in Mises's views on probability is that he denies the possibility of a priori (subjective) probability. The fact is that a priori probability does exist; however, it is not relevant to human action because we have no a priori model of the human being nor is it conceivable (for very technical reasons that I'm not going to go into) that such a model could ever be constructed.

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In classical economy, I know he will pick chocolate if probability is 50% but will pick vanilla when probability is 60%.

No way. To stay in touch with reality, "classical economy" is forced to come up with risk aversion and similar mumbo jumbo, which effectively destroys any promised prediction power.

See, e.g., http://en.wikipedia.org/wiki/St._Petersburg_paradox

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It's like will the sun rise tomorrow? I can predict that with classical common sense. In austrian, I will know it tomorrow. Well, c'mon? We know more than that now.

No. In science you have empirical testing and induction. Not so in the Austrian school.

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I know he will pick chocolate if probability is 50% but will pick vanilla when probability is 60%.

Even if you very, very, very, very, very much prefer the other choice?

It's like saying you have two choices: 40% chance of winning $100 and 4% chance of winning $1000 and you only pick once. What would you choose? Multiplying the probability by the value gives no answer, but I'm sure most people would choose the 40% chance.

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genepool replied on Wed, May 16 2012 12:54 AM

Let's get back to original topic.

 

Do countries have utility function?

 

If the answer is no, then we run into a different dilemma. That means policies of countries are totally unpredictable. C'mon. To a certain extend we can predict it. In fact, we can change it, say by bribing.

 

Perhaps a country does have utility function, namely the weighted average of it's most powerful member.

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