Ep. 724: Inside The Game Theory Mind with Michael Covel on Trend Following Radio
Michael Covel's Trend Following
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The Role of Rationality in Economics
People do not consciously optimize, they develop heuristics for dealing with all kinds of situations. I call it rule rationality. They develop rules of behavior and the rules are as a rule, they are rational. So that's my response to that question. Yes, I go along with Smith and with Kahneman because I say that right, people don't make explicit calculations. People do not optimize. Rather, they develop Heuristics for how to act in the real world. And these heuristics usually work fine. But occasionally they misfire when they are misapplied."
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