ABSTRACT
This chapter discusses the question of how economic models explain, despite the unrealism of their assumptions, because one of the self-stated aims of behavioural economics is to improve the realism of assumptions of economic theory. It describes the strategy of refuting behavioural economic models by showing that there is a standard economic model that accounts for the same phenomenon and show how behavioural economists argue against such refutations. As an example of a behavioural economic model, the chapter presents the paper Myopic Loss Aversion and the Equity Premium Puzzle. Behavioural economic models face in principle the same limitations as standard economic explanation. The chapter shows that the abductive inferences about the sameness of cause given the sameness of effects made from behavioural economic models to real economic systems are often more plausible than the abductive inferences made from standard economic models.
