Exam 21: Thinking Like a Modern Economist

How does the empirical testing of formal models "reverse" the process of heuristic empirical modeling?

How do traditional and behavioral economists differ in their opinions about economic growth?

How do traditional and behavioral economists differ in their opinions about whether households are saving enough?

Have all modern economists given up the use of the traditional building blocks? Why or why not?

What is a game theory model? Give two examples of decisions by households or businesses that you think might be appropriately analyzed using game theory models. Give two examples of decisions by households or businesses for which the use of a game theory model might not be necessary. What is the harm of using a game theory model where it is not necessary?

Suppose you were suspicious that shorter people lived longer lives, how would you go about testing this hypothesis? What kind of model would you need to use? How would you determine whether height was related to longevity? What are the potential shortcomings of your analysis?

What are two different kinds of equilibria that would have been difficult for early economists to analyze but are possible to analyze today because of advances in mathematics and computing?

How do the traditional building blocks differ from the behavioral building blocks? What similarities do they have? What are the advantages and disadvantages of each set of building blocks?

What are the limits of heuristic models?

Give an example of two different sets of assumptions that could underlie different economic models.