Diminished-Dimensional Political Economy

Year: 
2014
Working Paper Number: 
WP 14-14
Abstract: 

Economists' policy advice is based on models of responses by a variety of economic entities to policy adoptions. There is compelling evidence that these entities do not optimize in at all the fashion that mainstream economics assumes. Rather, they

limit decision-making to solving problems of much smaller dimensionality. We consider how political economy goes awry when ignoring diminished dimensionality, and some research avenues opened up by this realization.

JEL Codes: 
D6, B41, H42, H11
Authors: 

Reinhard Selten

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