Summarize and explain two of Thaler\'s critiques on economic modeling from the link attached below. Then provide some comments on how he thinks they will be improved. Feel free to add any of your own suggestions.
http://faculty.chicagobooth.edu/Richard.Thaler/research/pdf/homo.pdf
The first is the improvement to be made in the prospect theory with certain alterations. The prospects theory has to rectify its problems but does not address the methods to do changes in the same. If pre-planned budget of the user is assured then there could be adjustments made in expenditures as well. It could be achieved by reducing decision making problems in the entire process which requries problem-editing process. It could be triggered off if the decision making is done considering all the factors to avoid excessive spendings and more savings in a smar t and efficient way of business making. The second effect is rectification in bounded rationality which shows lack of knowledge about the insights made in differentiating the normative and descriptive theory. The rationale decisions and choices are made by normative theory whereas, the real and actual decision is made by the use of descriptive theory. The normative theory is shown by life-cycle theory and utility theory and descriptive thoery is visualised by maximising the sales by the managers when they focus more on target sales. The descriptive theory could be analysed by sales maximisation theory of Baumol which works upon maximisation of sales in the market by the decisions made by the manager in over-coming the problems faced and minimising the errors.
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