causal

Optimization Assumption Hides Modeling Difficulty

Modeling becomes deceptively easy if you assume agents optimize like physicists, because then everything reduces to math; but realistic modeling must also describe how boundedly-rational agents muddle through via heuristics and trial-and-error with few trials, which is far harder and is often avoided—'looking for the keys under the lamppost.'

causalpending

Speaker

Paul Pfleiderer

Evidence Quote

It's much easier to say, Well, here's the environment; now I'll just assume that agents have rational expectations, infinite processing power, and can optimize.

Source

Paul Pfleiderer on the Misuse of Economic ModelsEconTalk
Created: 6/13/2026, 12:27:00 AM

My Notes

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