An objection to elegant economic models is that people do not consistently behave rationally. Individuals can hold incompatible opinions and respond to perceived dangers before weighing their probability. The example imagines hearing movement behind a bush and reacting to the possibility of a tiger. The argument is that an instinct useful in one setting can persist where the original danger is absent.
Notable Point · 44:20-45:48
The human-behaviour problem in economic models
Instinctive reactions and inconsistent beliefs complicate economic theories built around rational behaviour.