Rational-Actor Model The Core Question

Direct statement of the core challenge facing economics from one of the top (not so young) young economists, Xavier Gabaix  at Big Think.  The whole post  is great,  with eight economists identifying theoretical directions (and follow the links).

The most central open question in economic theory, as I see it, is how to model realistic economic agents.  Traditionally, economists have relied on the rational-actor model, but it is clear that it is just a rough caricature.  It has been greatly enriched by behavioral economics in the past 30 years.  Still, we are far from a unified, versatile, believable alternative to the rational-actor model.  I am hopeful, though, that this might be overcome – in part because of progress in the sister disciplines (psychology and neuroscience) and basic modeling, and also because empirical anomalies are forcing the economic profession to be more open-minded.   Contributions by computer scientists and physicists will help inject new perspectives into economics.

Of course, there’s a fair bit of faddish wankery mentioned. But it wouldn’t be theory without it.

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