Welfare economics and bounded rationality: the case for model-based approaches
journal contribution
posted on 2023-06-09, 08:43authored byPaola Manzini, Marco Mariotti
In this paper, we examine the problems facing a policy maker who observes inconsistent choices made by agents who are boundedly rational. We contrast a model-less and a model-based approach to welfare economics. We make the case for the model-based approach and examine its advantages as well as some problematic issues associated with it.