Models..............................

     For four decades, since my time as a graduate student, I have been preoccupied by these kinds of stories about the myriad ways in which people depart from the fictional people that populate economic models.  It has never been my point to say that there is something wrong with people;  we are all just human beings - homo sapiens.  Rather, the problem is with the model being used by economists, a model that replaces homo sapiens with a fictional creature called homo economicus, which I like to call an Econ for short.  Humans do a lot of misbehaving, and that means that economic models make a lot of bad predictions, predictions that can have much more serious consequences than upsetting a group of students.  Virtually no economists saw the financial crisis of 2007-2008 coming, and worse, many thought that both the crash and its aftermath were things that simply could not happen.

-Richard H. Thaler,  Misbehaving:  The Making of Behavioral Economics