As behavioral economists, we should aspire to develop a single positive model that encompasses all of our discoveries. The reason is obvious. We can criticize neoclassical economics and make intellectual stand-up comedy acts about how unreal and silly the
Econs-the inhabitants of its world-are. But one thing is clear: as models go, neoclassical economics is as solid as you can get. It starts with three intuitively understood assumptions and builds the entire economic framework upon them. Beautiful!
The predictions of neoclassical economics do not always concur with the real-World evidence. Far from it! But as a model, it is nicely built, and we should appreciate beauty.
Here, we construct such model for behavioural economics, It is built upon a Principle of (Economic) Relativity, i.e., the idea that the economic rules and laws must stay the same across all frames of references, and for everyone. Furthermore, we introduce the Rules of Rationality, which embody the single most important point of our model:
"The essence of economic rationality lies in the assumption that we are limited in how much value we can create!"
This work is to unite the seemingly contradictory natures of behavioural and neoclassical economics. This is about unifying and bridging the gaps.
