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Tuesday, November 09, 2010

Some of what is wrong with economics today

On page 1313 (actual page 14) of the current issue of the American Economic Review has this very intuitive and, of course, easy to implement statement:

The optimal donation aj by a citizen satisfies the first-order condition, which in a symmetric equilibrium is




Does the author really think that individuals behave according to this equation? If not, then why should we? If so, then what?

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Comments:
I don't see your point. Of course we believe that people behave according to our equations.

In fact, I've seen equations in some of your papers describing how you think people behave. (To be fair, in a couple, I put 'em there.)
 
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