Chat with AIExam 21: Thinking Like a Modern Economist
What does your author mean when he says that there is a tradeoff between simplicity and completeness?
(93) 
VerifiedHe means that the broadest building blocks (like those used by behavioral economists) and the most complex models add the most technical difficulty and are the hardest to solve. While they may be broad enough that they can capture the nuances of human behavior, they may be so complicated that they cannot be solved and nothing will be learned from them.
What is a natural experiment? Why do economists rely on natural experiments?
(71) VerifiedA natural experiment is a naturally occurring event that can serve as an experiment. Economists must often rely on natural experiments because they do not have the luxury of running controlled experiments.
What are heuristic models? Do they help us understand the world around us? What are their limits?
(81) VerifiedHeuristic, or informal, models are models that are expressed in words. Basically, they are stories that can give plausible explanations for patterns or results observed in the real world. They do not rely on formal scientific or empirical methods. These models give us a sense of understanding, when successful, because they offer explanations that are satisfying. However, they can never provide a True understanding of the world because they are only tested on their reasonableness. They take advantage of the fact that the human mind is a fast pattern completer and appreciates stories that fit together nicely. In order for a heuristic model to offer us a True understanding of the world around us, the assumptions and results of these models would have to be tested scientifically with out-of-sample data. Heuristic models are a good starting point in pursuit of understanding, because they can help us rule out explanations that do not conform to proper reasoning.
Do the assumptions of a model have to accurately describe behavior for the model to be useful? Explain.
(86) If behavioral economists do not believe that people are rational, what do they believe? Do behavioral economists believe that people are irrational?
(84) Give four examples of complicated modern formal models that are usable due to advances in mathematics and computing, and give a brief description of each.
(89) What is a regression model? How do you interpret the worth of a regression model?
(74) What is the difference between the purposes of a scientific model and an engineering model?
(77) What is the endowment effect? How do behavioral economists explain the existence of this phenomenon?
(80) Is following a rule-of-thumb rational? Can it ever be rational to be irrational?
(78) Are modern economists unified in their prescriptions for government policy? Do behavioral economists and traditional economists generally agree or disagree on government policy?
(72) How do traditional and behavioral economists differ in their opinions about whether the government should have done something to stop the housing bubble in the early 2000s?
(70) In your text, the author says, "Data, by themselves, have no meaning; they have to be interpreted and given meaning, and how one interprets the data depends on the model and the building blocks one has in one's mind." What does he mean by this? What does this say about the relationship between empirical and formal models?
(79) Suppose a person buys only fruits and vegetables while at the grocery store, even though he or she hates fruits and vegetables and would much rather eat junk food. Much of the produce goes bad before it is consumed and must be thrown out. What name is given to this kind of behavior? Is it rational?
(76) Do economic models lead directly to theorems or to precepts? Why or why not?
(87) What does your author mean when he says that the human mind is a fast pattern completer?
(82) 
Filters
- Essay(0)
- Multiple Choice(0)
- Short Answer(0)
- True False(0)
- Matching(0)