My biggest qualm with my studies in economics so far at college has been how unrealistic the assumptions of perfect rationality are in economic models. As such, the more psychologically informed assumptions that exist in behavioral economics, from present bias to loss aversion, allows for a greater level of accuracy when it comes to the human agent making economic choices. Alyssa brought up Laplace’s Demon to discuss the hypothetical of whether or not knowing ‘all’ of psychology and economics would then allow us to go back to traditional economics, just based on all of these super refined equations, to which Prof. Laibson expressed how unlikely that would be. To me, it seemed surprising that he thought it would be impossible to predict economic events in a horizon of 20 years, not just within his lifetime, but ever.
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