Chapter Five. Constructing a Model of Measurement and Dysfunction

To move analysis of incentives beyond the H-M model described in Chapter Four, it will be necessary to build a new model, the model used in the rest of this book. Before we begin, however, there are a few things that should be made clear about any modeling exercise.

What is a model? A model is a simplification; it is, by definition, a departure from reality. When reality is too complex to reason confidently about, it is often useful to extract details of a situation in the form of some simple assumptions, and then to see what can be concluded with confidence from this simpler view of the world. A model takes assumptions and converts them into corresponding conclusions. A modeling ...

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