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Yeah but what use is a model where you assume irrational actors? I'm not a huge fan of it but I understand the concessions that have to be made.

• zem 12y ago
  on the contrary, what use is a model where you assume perfectly rational actors? it will clearly bear no relation to reality! actually, i object to the term "irrational", it's only irrational if you assign zero value to the "feel good" incentives driven by basic human psychology. one interesting thought experiment, for instance, is that most people would neither pay someone else to do their housework, or do someone else's equivalent housework for the same amount of money. from a "purely rational" economic standpoint, that makes no sense - either you think the money is worth less than the cost of doing the housework, in which case you would pay someone to do yours, or it is worth more, in which case you would do yours and then take the money to do someone else's as well. but add in the psychological difference between doing your own work and doing someone else's, and the whole thing is perfectly rational in the understood, if not the technical economic sense of the word.
• cmyr 12y ago
  what's the use of assuming rational actors if it means your model is fundamentally flawed? Take the assumption that labour will migrate rationally to suit a changing job market. I.E. if your state doesn't have any jobs, but there are lots of jobs across the country, you'll go there. When I was last studying economics, this was treated as a rule. In what I've seen of the world, it's completely ungrounded. For certain people, facing certain classes of hardships, this might hold true, but it doesn't even begin to account for things like family or for a sense of home and/or community, or for being in love, or for being comfortable, or scared of change, or any of the other massive number of "irrational" things that influence people's behaviour. Any model that just ignores these fundamental things isn't just useless, it actually leads to conclusions and policies that do not relate to the reality of peoples' lives. This is a really really big problem.
• dragonwriter 12y ago
  > Yeah but what use is a model where you assume irrational actors? For one thing, its likely to be more useful in modeling a system where actors are, in fact, not rational. Like, for instance, the world we live in. I mean, sure, it gets more complex, just like mechanics does when you can't assume everything is frictionless. But a simpler model that doesn't reflect reality has limited utility.