3. Human mistakes in macro models

Many people make errors in their financial planning for retirement. This sub-project will revisit the design of pension reforms, and other welfare state policies, when human error and bounded rationality are taken into account. Bounded rationality is the idea that in decision-making, rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision.

Bridge the gap between policy makers and Economists

The potential gains for this subproject are large. The grand aim of modern macroeconomics is to build a structural model of human behavior that is sufficiently rich to capture human behavior  and sufficiently simple that it remains tractable and can be useful for addressing real policy questions. A major obstacle for having policy makers take seriously macroeconomic implications of policy reforms is that these models have so far lacked a convincing element of human error.

Published July 7, 2014 1:07 PM - Last modified Apr. 3, 2023 4:12 PM