Season 1 · Episode 371
Does human behaviour render all economic models useless?
Do economists oversimplify human behaviour with the notion that there is one rational agent? But if we start delving into the variety of responses, wouldn’t the complexity render models useless?
Debunking Economics - the podcast · Steve Keen & Phil Dobbie
October 4, 202344m 13s
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Show Notes
Economists like to believe human behaviour is predictable. Otherwise, they probably wouldn’t have a job. Steve Keen argue that we do tend to behave like the rest of the herd, but how many herds are there? Phil asks if economists need to develop the sort of demographic segmentation modellers that marketers use? It’s certainly a long way from the basic assumption that we all act the same – as one representative agent, driven by fear and greed. But if we develop a more sophisticated approach, predicting behaviour for a number of segments of society, wouldn’t we arrive at a model so complicated, so full of assumptions, that it renders the model useless? In other words, can we ever really understand the psychology of human behaviour?
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