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Discussion 2 of 3: No spooky action at a distance - a theory of reward

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Part 2 in a short series of posts. Part 1 and part 3 are also available.

One of the most powerful ideas in physics is the principle of locality. This principle insists that objects can only be influenced by other objects that touch them. Two items separated by a distance cannot directly exert any force or influence on each other, but must communicate via some medium which physically transmits the force from one to the other.

Albert Einstein described this principle as "no spooky action at a distance" and it applies to his theory of gravity as well as all the other physical forces (it gets more complicated when we consider quantum mechanics, but that would take a whole other article). The Scottish physicist James Maxwell also used it in developing his theory of electromagnetism.

Instead of the magnets directly pushing or pulling each other, each magnet creates an electromagnetic field, and sends out the field into the world around it, transmitted by light waves. When anothe…
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The economics zeitgeist, 5 June 2011

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This week's word cloud from the economics blogs. I generate a new one every Sunday, so please subscribe using RSS or the email box on the right and you'll get a message every week with the new cloud.

The words moving up and down the chart are listed here.
I summarise around four hundred blogs through their RSS feeds. Thanks in particular to the Palgrave Econolog who have an excellent database of economics blogs; I have also added a number of blogs that are not on their list. Contact me if you'd like to make sure yours is included too.
I use Wordle to generate the image, the ROME RSS reader to download the RSS feeds, and Java software from Inon to process the data.
You can also see the Java version in the Wordle gallery (please ignore the "5 May" caption, my mistake - it's actually 5 June).
If anyone would like a copy of the underlying data used to generate these clouds, or if you would like to see a version with consistent colour and typeface to make week-to-we…
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The Cognitive Microfoundations Project: a behavioural economics world tour

There has been much talk about microfoundations on the economics blogs in the last few months [Noahpinion, Mark Thoma, Simon Wren-Lewistwice, Andrew Gelmantwice, Karl Smith, Paul Krugmantwice, Robert Waldmann, Rajiv Sethi from 2009]. The idea of microfoundations is that a model of the overall economy should be consistent with how individual people act. The aggregate behaviour of variables like GDP, government deficits and unemployment should be derived by adding up the choices of individuals, not by treating the whole population as if it were a single entity.

(A microfounded model might start off like this: "Imagine N agents, each of which has income yn, consumes cn and saves sn. Then yn = cn + sn. For each agent, sn varies with the interest rate r according to the following relation..." while a non-microfounded model is more likely to start: "Total spending in the economy is C and saving is S. C+S must sum to Y, total income. S varies with the interest rate r...")

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