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@Bumby, you had a thoughtful question. I'm not sure where you're comment went, so replying at top level: >> Why? Because people make rational decisions across
by tomrod 5y ago
@Bumby, you had a thoughtful question. I'm not sure where you're comment went, so replying at top level:
>> Why? Because people make rational decisions across the distribution.
> Do you mean that the average consensus converges on a rational decision? From an economists perspective, where does that assumption tend to break down and what are the best mechanisms for mitigating it?
To clarify, on average people make microeconomics decisions that move a macroeconomic distributions in a measurable (and sometimes predictable) fashion.
Connecting microeconomics foundations to macro models also allows for structural estimation of unobservable parameters, but that's really a tangent.
Your question is getting more at behavioral economics/mechanism design (e.g bounded rationality), on which topic I am not deeply studied. The aphorism "the market is rational on average" seems related, perhaps?
- OGWhales 5y agoTheir comment is "dead" but you can make it visible by enabling "showdead" under your account settings.
- fuzzfactor 5y ago>"the market is rational on average" Goes along with the equally well-proven: "The market can remain irrational longer than you can stay solvent." Don't worry this has no effect except for those times when people or governments are trying to become or remain solvent to begin with. Macroeconomics is not just big amounts of money, it's also big amounts of time.