6 highlights
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There’s even a joke among economists that every few years, a physicist stumbles into the field, looks at the math and declares that none of it makes sense (and then tries in vain to fix it).
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Paradoxes like these are often used to highlight irrationality or human bias in decision making. But to Peters, it’s simply because people understand it’s a bad deal.
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The problem, Peters says, is the model fails to predict how humans actually behave because the math is flawed.
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If Peters is right — and it’s a pretty ginormous if — the consequences are hard to overstate.
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His beef is that all too often, economic models assume something called “ergodicity.” That is, the average of all possible outcomes of a given situation informs how any one person might experience it. But that’s often not the case, which Peters says renders much of the field’s predictions irrelevant in real life.
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He lambasts Peters for misunderstanding the economic theory behind decision making and says Peters’ work ultimately amounts to little more than a straw-man argument that solves a narrow set of problems that already had well-known solutions.