Paul Pfleiderer on the Misuse of Economic Models

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4.7 • 4.4K Ratings

🗓️ 8 September 2014

⏱️ 61 minutes

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Summary

Paul Pfleiderer, C.O.G. Miller Distinguished Professor of Finance at the Graduate School of Business at Stanford University, talks with EconTalk host Russ Roberts about his recent paper critiquing what Pfleiderer calls "Chameleon Models," economic models that are thought to explain the real world with little analysis of the accuracy of their assumptions. Also discussed are Akerlof's market for lemons model, Friedman's idea that assumptions do not have to be reasonable as long as the model predicts what happens in the real world, and the dangers of leaping from a model's results to making policy recommendations.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty.
0:06.4	I'm your host, Russ Roberts, of Stanford University's Hoover Institution.
0:11.0	Our website is econtalk.org, where you can subscribe, comment on this podcast, and find
0:16.0	links and other information related to today's conversation.
0:19.0	You'll also find our archives where you can listen to every episode we've ever done going
0:23.2	back to 2006.
0:25.4	Our email address is mailadycontalk.org.
0:27.9	We'd love to hear from you.
0:33.2	Today is August 28, 2014, and before introducing today's guest, I want to mention that I have
0:38.5	a new book coming out.
0:40.2	It's now available for pre-order at Amazon.
0:42.7	The title is, How Adam Smith Can Change Your Life An Unexpected Guide To Human Nature
0:48.2	Inhappiness.
0:49.2	It's my attempt to apply Smith's theory of moral sentiments to modern life, lessons related
0:53.3	to work, parenting, marriage, virtue, and even possibly happiness.
0:58.2	Long-time listeners will remember the six-part series with Dan Klein on the Theory of
1:01.7	Moral Sentiments.
1:02.7	You can check that out on the archives.
1:04.4	And there will be an interview about the book with me coming soon with Mike Munger as
1:08.6	interviewer.
1:09.6	I'm sure will grill me mercilessly now to today's guest.
1:14.1	He is Paul Fliterer.
	...

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