Charlie Plott gave us the Fundamental Equation for an economic explanation. The simplified version is Preferences + Beliefs + Institutions = Outcomes. To explain differences on the right-hand side, you need differences on the left-hand side. Given our understanding of decision theory since Savage, decision-makers are simply endowed with beliefs and preferences. Those are starting assumptions. We don’t think of those changing directly. After all,
Institutions Have Knowledge, Not People
Institutions Have Knowledge, Not People
Institutions Have Knowledge, Not People
Charlie Plott gave us the Fundamental Equation for an economic explanation. The simplified version is Preferences + Beliefs + Institutions = Outcomes. To explain differences on the right-hand side, you need differences on the left-hand side. Given our understanding of decision theory since Savage, decision-makers are simply endowed with beliefs and preferences. Those are starting assumptions. We don’t think of those changing directly. After all,