Economic models are often criticised for relying on absurd assumptions, such as perfect rationality. Despite this criticism, these models persist throughout our politics, policy, and in business.

If modelling is the art of simplifying a complex world through assumptions and abstractions, the question is not if these assumptions are true, but whether they are useful. What makes a good assumption? When does a simplification improve understanding vs worsen it? Let's discuss how economists approach these questions, from traditional modelling methods, to more recent developments in behavioural economics that adapt the assumptions with psychological research.

For further reading, Milton Friedman’s The Methodology of Positive Economics (1953)