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20 Oct 09

Jon Elster, "Excessive Ambitions", Capitalism and Society vol 4, no. 2 (2009)

The current financial crisis has brought out a fatal flaw in the foundations of the economic theories that guided economic agents and regulators: the unwarranted claim to precision and robustness. In this article I try to diagnose this flaw and discuss possible remedies. I argue that actual agents are intrinsically less sophisticated than the models assume they are, and that the various proposals to sustain the models by appealing to "as-if rationality" all fail. I next consider behavioral economics as an alternative to the standard models, claiming that while they may allow for successful retrodiction, they do not hold out much promise for prediction. I also discuss the use of statistical models, arguing that they are subject to so many traps and pitfalls that only a handful of elite practitioners can be trusted to use them well. Finally, I offer some speculations to explain the persistence in the economic profession and elsewhere of these useless or harmful models.

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capitalism economics sociology theory

10 Sep 09

SSRN-Does Anyone Read the Fine Print? Testing a Law and Economics Approach to Standard Form Contracts by Yannis Bakos, Florencia Marotta-Wurgler, David Trossen

A cornerstone of the law and economics approach to standard form contracts is the 'informed minority' hypothesis: in competitive markets, a minority of term-conscious buyers is enough to discipline sellers from offering unfavorable boilerplate terms. The

papers.ssrn.com/...papers.cfm - Preview

Bookmarks law economics contracts empirical research

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