Chapter 1 Econ Beha

–Describes the world as it is
–Can be confirmed or refuted
–Is centered on fact

–Describes the world as it should be
–Cannot be confirmed or refuted with data
–Is opinion (perhaps widely accepted opinion, but
still opinion)

describes
how individuals actually make decisions

describes how
individuals should make decisions

1. Normative objection
2. Descriptive objection

1) identify areas in which standard economic
theory fails to make accurate predictions of
human behavior,
2) Understand the cause of these deviations,
primarily using insights from psychology, and
3) Amend the theory to make better predictions
of human behavior.

lazy, when asked a hard question, we answer a simple question, we find coherent stories to be most convincing, regardless of how complete they are

a rational utility maximizer) that is comprehensive, elegant, and capable of making accurate aggregate predictions.