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3 The effects of modelling by agents on complexity
3.1 Ignoring the process of modelling by economic agents
Since we are agents with distinctly bounded rationality with access only to imperfection information (as described in section 2.4 above), it makes sense for us to start with simple models and only progress to more complex ones if wee need to, i.e. if our simpler models have inadequate predictive and explanatory power. If the agents are in a situation where the environment is changing sufficiently slowly and the agent has effective access to good information one can conflate the agent's best model of its environment and the true model of the environment, as the agent has plenty of time and resource to effectively estimate the true model.
In such circumstances it is sensible for us to choose the simpler model and ignore the agent's modelling process - it is notable that if we did not have distinctly bounded rationality and inadequate information there would be no reason for us not to search through models of all complexities for the most accurate one.
From Complexity to Agent Modelling and Back Again - Bruce Edmonds - 15 MAY 97
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