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I am not an economist, but I think economists have been doing a lot of catch up lately. Traditional economists have tended to see people as rational agents, wh

I am not an economist, but I think economists have been doing a lot of catch up lately. Traditional economists have tended to see people as rational agents, whereas more recent behavioral economists are showing how people are pretty universally irrational. Sure, in an idealized economic simulation we would consider every possibility and only choose the most optimal one. It only stands to reason in such an environment we should remove barriers and maximize choice. But the reality is people are limited and take shortcuts in decision making that traditional economists never even imagined. Those human cognitive limitations need to be seriously considered before jumping to any conclusions about economic policy.

mdda 16y ago
But economists would all agree that the models have limitations - that's not really news. The news here is that the limitations are a 10% slice rather than a 1% slice. But that doesn't stop the theory being 90% correct. Incentives-wise : is it easier to get people to buy a book about 'classical economics' or the 'whole new type of economics that makes those classical guys look like dinosaurs'?
- pedanticfreak 16y ago
  I would liken it more to elaborate geocentric models of the solar system. Sure, they can explain the data. And they can make accurate predictions within a certain margin of error. But then there are the cases they can't explain or predict accurately. Not to mention they keep getting more complex and more uncomfortable to believe. At the end of the day it's just the completely wrong idea tortured to give the right answers. The solar system was heliocentric all along. That's the kind of place I think traditional economic models are in right now. We're steps away from proving out the planets orbit the Sun, but there are still a lot of smart people writing elaborate dissertations about the Sun orbiting the Earth.
deleted 16y ago
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dctoedt 16y ago
> more recent behavioral economists are showing how people are pretty universally irrational I suspect economists might phrase it more guardedly, along the lines of "people don't always behave in a totally-rational manner."

mdda 16y ago

But economists would all agree that the models have limitations - that's not really news. The news here is that the limitations are a 10% slice rather than a 1% slice. But that doesn't stop the theory being 90% correct. Incentives-wise : is it easier to get people to buy a book about 'classical economics' or the 'whole new type of economics that makes those classical guys look like dinosaurs'?

pedanticfreak 16y ago
I would liken it more to elaborate geocentric models of the solar system. Sure, they can explain the data. And they can make accurate predictions within a certain margin of error. But then there are the cases they can't explain or predict accurately. Not to mention they keep getting more complex and more uncomfortable to believe. At the end of the day it's just the completely wrong idea tortured to give the right answers. The solar system was heliocentric all along. That's the kind of place I think traditional economic models are in right now. We're steps away from proving out the planets orbit the Sun, but there are still a lot of smart people writing elaborate dissertations about the Sun orbiting the Earth.

deleted 16y ago

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dctoedt 16y ago

> more recent behavioral economists are showing how people are pretty universally irrational I suspect economists might phrase it more guardedly, along the lines of "people don't always behave in a totally-rational manner."