"But Can't we Get the Same Thing with a Standard Model?" Rationalizing Bounded-Rationality Models

Spiegler, Ran (2010): "But Can't we Get the Same Thing with a Standard Model?" Rationalizing Bounded-Rationality Models.

Abstract

This paper discusses a common criticism of economic models that depart from the standard rational-choice paradigm - namely, that the phenomena addressed by such models can be "rationalized" by some standard model. I criticize this criterion for evaluating bounded-rationality models. Using a market model with boundedly rational consumers due to Spiegler (2006a) as a test case, I show that even when it initially appears that a bounded-rationality model can be rationalized by a standard model, the rationalizing models tend to come with unwarranted "extra baggage". I conclude that we should impose a greater burden of proof on rationalizations that are offered in refutation of such models.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bounded rationality, methodology, theory selection, rationalizations
• Subjects: D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles; B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B49 - Other

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