To: dvdw© who wrote (99004 ) 3/6/2013 12:33:17 PM From: Gemlaoshi 1 Recommendation Read Replies (3) | Respond to dvdw, Disruptive exogenous changes fortunately do not happen often and are not a major impact on most experienced model builders. Most modelers construct numerous scenarios with varying time frames to account for exogenous impacts such as changes in regulatory environment, major supply disruptions, fuel switching, etc. Of course, the longer the time frame of the model (i.e. for capex analysis), the higher the probability of a "black swan" disruptive event that has not been accounted for in the models. Provably unrealistic assumptions are pervasive in neoclassical economic theory (also called the "standard theory" or "neoclassical paradigm"), and those assumptions are inherited by simplified models for that theory. (Any model based on a flawed theory, cannot transcend the limitations of that theory.) Joseph Stiglitz ' 2001 Nobel Prize lecture [3] Information Asymmetries , which contrasts with the assumption, in standard models, of "Perfect Information". Stiglitz surveys many aspects of these faulty standard models, and the faulty policy implications and recommendations that arise from their unrealistic assumptions. en.wikipedia.org
