If we assume that we, as humans, have no knowledge a priori from our creation, and that we instead are only more or less certain about any given proposition, then we must start to examine the most basic propositions in our world. The goal, in so doing, is not to determine some empirical probability that we have for any specific proposition or type of proposition, on average. Nor should we be naive enough to believe that we might be able to order our confidence in any two specific propositions. Although confidence can be expressed on a continuum from 0 to 1, we resign our practical ability to fall short of precisely determining our internal confidence in any given proposition, much less a strict comparison between two propositions in which we have similar confidence.
Rather, by examining some propositions, we can perhaps discover how our brains operate in practice, by producing a rough classification which distinguishes certain problems from others. Then, we might generally say that we are naturally inclined to be more confident in the truth of some propositions than others. Another way of stating our goal is that we might classify the order of complexity of a given proposition, based on the constituent elements of that proposition - much in the same way as a grammar teacher might be able to evaluate the complexity of a sentence based on the parts of speech, syntax, and vocabulary of which it is comprised.
How do life insurance markets operate within the classic textbook framework? Is the market perfectly competitive, or do some frictions exist that cause macro-level inefficiencies? The answer depends on what type of insurance product you are looking at, as term insurance and universal life insurance markets have drastically different competitive elements.1
Term life insurance is, all things considered, a very simple form of insurance which is consistent with other lines of insurance such as health or auto. Assuming, for example, that a 35 year old male will need coverage for 10 years, a fixed cost payable annually can cover that risk. When shopping competitively for rates, this individual has one primary element to consider: the amount of the premium. Because of the simplicity of the insurance, consumers can fairly easily compare rates to find the lowest cost policy. This is as close to a perfectly competitive market as exists in financial markets, on par with bonds and other "plain vanilla" assets.
The concept of ex post determinism, which I have referred to here as scientific determinism, is not a new concept by any stretch. Various forms of determinism have been proposed and debated over the last several centuries, and while the boundaries I have laid out may differ, the idea that events are deterministic is well trodden ground.
Perhaps one of the most extreme, or pure, forms of determinism is represented by Laplace's demon. "Laplace's demon" is the name given to the ideas posited in a passage late in Laplace's life on probability (available here). In simple terms, Laplace expressed the idea of pure determinism: If the position and speed of all particles in the universe are known at a time t=0, then the state of the world at a later time t=1 can be perfectly calculated. Laplace, an early statistician, perhaps most clearly demonstrates the divide between frequentist (or probabilist) and Bayesian modes of thought: You may notice that Laplace's demon seems to have nothing at all to do with statistics as we know it today.
Monopoly is a game made familiar to many of us as children; and, as a game of property and trade, it is natural to consider what economic lessons it might teach. It is fairly evident that the objective of the game - to own all property on the board by raising rents on captive, choiceless consumers - does not represent any sort of market economy. This has been well-documented elsewhere, and for a more complete discussion of the economic faults of the game, I would direct you to those sources.
However, this is not to say that there are no elements of the game that can teach us valid economic lessons, whether directly or indirectly. Economists should not disregard these lessons simply because the broader game economy is unrealistic or does not align with their views. Here are a few things Monopoly can teach us.
The assumption made about the limits of our knowledge is key to developing further theories on how we process information to come to an understanding of higher-order problems, as well as our construction of choice sets when faced with choices (whether ethical or preferential in nature). Here I will argue the skeptical view that we may know nothing infallibly. It is important to specify what constitutes knowledge, then subsequently to realize that we do not possess it. Finally, I will consider the implications of this - if we do not possess knowledge, what do we possess?
To know a fact is to say that the fact cannot possibly be incorrect. Consider an object in front of you. If you were to close your eyes, you would expect that object to remain in front of you when you were to open them again. Nevertheless, it is conceivable that the object may no longer be there. There are myriad explanations for why this might have occurred - in fact, there are infinite possible explanations, just as we can conceive of infinite explanations for why an action did not cause a reaction, as we have seen.
