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Excessive Ambitions


  • Elster Jon

    (Collège de France and Columbia University)


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.

Suggested Citation

  • Elster Jon, 2009. "Excessive Ambitions," Capitalism and Society, De Gruyter, vol. 4(2), pages 1-33, October.
  • Handle: RePEc:bpj:capsoc:v:4:y:2009:i:2:n:1

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    References listed on IDEAS

    1. Hoon, Hian Teck & Phelps, Edmund S, 1992. "Macroeconomic Shocks in a Dynamized Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 82(4), pages 889-900, September.
    2. Frydman, Roman, 1982. "Towards an Understanding of Market Processes: Individual Expectations, Learning, and Convergence to Rational Expectations Equilibrium," American Economic Review, American Economic Association, vol. 72(4), pages 652-668, September.
    3. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
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    Cited by:

    1. repec:bus:jphile:v:10:y:2016:i:1:n:2 is not listed on IDEAS
    2. Holmlund, Bertil, 2014. "What do labor market institutions do?," Labour Economics, Elsevier, vol. 30(C), pages 62-69.
    3. David Dequech, 2016. "Some Institutions (Social Norms And Conventions) Of Contemporary Mainstream Economics, Macroeconomics, And Financial Economics," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 006, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    4. Kallåk Anundsen , André & Sigurd Holmsen Krogh, Tord & Nymoen, Ragnar & Vislie, Jon, 2011. "Overdeterminacy and endogenous cycles: Trygve Haavelmo’s business cycle model and its implications for monetary policy," Memorandum 03/2011, Oslo University, Department of Economics.
    5. Mohun, Simon & Veneziani, Roberto, 2010. "Reorienting economics?," MPRA Paper 30448, University Library of Munich, Germany.
    6. Attila Havas, 2015. "The persistent high-tech myth in the EC policy circles - Implications for the EU10 countries," IEHAS Discussion Papers 1517, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    7. Stavros A. DRAKOPOULOS, 2016. "Economic crisis, economic methodology and the scientific ideal of physics," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 10(1), pages 28-57, November.
    8. repec:eee:matsoc:v:91:y:2018:i:c:p:85-95 is not listed on IDEAS

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