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  2. Rational choice model - Wikipedia

    en.wikipedia.org/wiki/Rational_choice_model

    Individuals make no difference to the outcome, “much as single molecules make no difference to the properties of the gas" [citation needed] (Herbert, G). This is a weakness of rational choice theory as it shows that in situations such as voting in an election, the rational decision for the individual would be to not vote as their vote makes ...

  3. Occam's razor - Wikipedia

    en.wikipedia.org/wiki/Occam's_razor

    Therefore, to the same natural effects we must, as far as possible, assign the same causes." [20] [21] In the sentence hypotheses non fingo, Newton affirms the success of this approach. Bertrand Russell offers a particular version of Occam's razor: "Whenever possible, substitute constructions out of known entities for inferences to unknown ...

  4. Complexity economics - Wikipedia

    en.wikipedia.org/wiki/Complexity_economics

    The "nearly archetypal example" is an artificial stock market model created by the Santa Fe Institute in 1989. [5] The model shows two different outcomes, one where "agents do not search much for predictors and there is convergence on a homogeneous rational expectations outcome" and another where "all kinds of technical trading strategies appearing and remaining and periods of bubbles and ...

  5. Positive and normative economics - Wikipedia

    en.wikipedia.org/wiki/Positive_and_normative...

    Positive economics as a science concerns the investigation of economic behavior. [4] It deals with empirical facts as well as cause-and-effect relationships. It emphasizes that economic theories must be consistent with existing observations and produce precise, verifiable predictions about the phenomena under investigation.

  6. Expected utility hypothesis - Wikipedia

    en.wikipedia.org/wiki/Expected_utility_hypothesis

    He proposed that a nonlinear function of the utility of an outcome should be used instead of the expected value of an outcome, accounting for risk aversion, where the risk premium is higher for low-probability events than the difference between the payout level of a particular outcome and its expected value. Bernoulli further proposed that it ...

  7. Von Neumann–Morgenstern utility theorem - Wikipedia

    en.wikipedia.org/wiki/Von_Neumann–Morgenstern...

    The lottery ′ is, in effect, a lottery in which the best outcome is won with probability (), and the worst outcome otherwise. Hence, if u ( M ) > u ( L ) {\displaystyle u(M)>u(L)} , a rational decision maker would prefer the lottery M {\displaystyle M} over the lottery L {\displaystyle L} , because it gives him a larger chance to win the best ...

  8. The best-case scenario for the economy has become more plausible

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  9. Rational expectations - Wikipedia

    en.wikipedia.org/wiki/Rational_expectations

    Lucas’ paper “Expectations and the Neutrality of Money” expands on Muth's work and sheds light on the relationship between rational expectations and the monetary policy. The paper argues that when individuals hold rational expectations, changes in the money supply do not have real effects on the economy and the neutrality of money holds.