Not only does [the great sociologist Robert K. Merton (father of the Nobel-winning economist)] provide a very clear account of equilibrium beliefs, but goes on to point out that even when these beliefs are correct in a narrow sense, they can hold in place an incorrect understanding of the social world. To translate this into the contemporary language of economics, Merton points out that the play of equilibrium strategies can go hand in hand with a deeply erroneous understanding of the game....
The economic method, for all its flaws, has one very important virtue: it shines a bright light on interests and incentives, and in doing so can challenge essentialist interpretations of social reality. But if this potential is to be realized, it is important to focus not just on the characterization of equilibrium behavior, but also on the reigns of error that distort our mental models of the underlying game.Rajiv Sethi Blog
Reigns of Error
Rajiv Sethi | Professor of Economics, Barnard College, Columbia University, & External Professor, Santa Fe Institute