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as long as the errors are random—that is, the model’s predictions are too high or too low with equal frequency—then all is well. The errors cancel each other out. This was economists’ reasoning to justify why the errors produced by bounded rationality could safely be ignored. Back to the fully rational model! Kahneman and Tversky were waving a big red flag that said these errors were not random.
Misbehaving: The Making of Behavioral Economics
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