LW4EA: Six economics misconceptions of mine which I've resolved over the last few years

Written by LW user Buck.

This is part of LessWrong for EA, a LessWrong repost & low-commitment discussion group (inspired by this comment). Each week I will revive a highly upvoted, EA-relevant post from the LessWrong Archives, more or less at random

Excerpt from the post:

Here are six cases where I was pretty confident in my understanding of the microeconomics of something, but then later found out I was missing an important consideration.

Thanks to Richard Ngo and Tristan Hume for helpful comments.

Here’s the list of mistakes:

• I thought divesting from a company had no effect on the company.
• I thought that the prices on a prediction market converged to the probabilities of the underlying event.
• I thought that I shouldn’t expect to be able to make better investment decisions than buying index funds.
• I had a bad understanding of externalities, which was improved by learning about Coase’s theorem.
• I didn’t realize that regulations like minimum wages are analogous to taxes in that they disincentivize work.
• I misunderstood the economics of price controls.

In each, I’m not talking about empirical situations at all—I’m just saying that I had a theoretical analysis which I think turned out to be wrong. It’s possible that in many real situations, the additional considerations I’ve learned about don’t actually affect the outcome very much. But it was still an error to not know that those considerations were potentially relevant. (Full Post on LW)

Please feel free to,

• Discuss in the comments
• Subscribe to the LessWrong for EA tag to be notified of future posts
• Tag other LessWrong reposts with LessWrong for EA.
• Recommend additional posts