In the 1990s, neoclassical economics faced many such puzzles, with gaps between how the theory suggested “economic actors” behaved and how real humans actually behaved in practice. For a long while, economics had been rooted in the concept of the “rational actor,” who was supposed to behave in predictable ways. For instance, as the theory goes, people respond to a rise in the cost of a good by buying less of it. Yet there is ample evidence that the economic choices of humans often defy this simple and logical principle.
