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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 ch
by 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.