Measuring the Completeness of Economic Models

Drew Fudenberg, Jon Kleinberg, Annie Liang and Sendhil Mullainathan

Journal of Political Economy, 2022, vol. 130, issue 4, 956 - 990

Abstract: Economic models are evaluated by testing the correctness of their predictions. We suggest an additional measure, “completeness”: the fraction of the predictable variation in the data that the model captures. We calculate the completeness of prominent models in three problems from experimental economics: assigning certainty equivalents to lotteries, predicting initial play in games, and predicting human generation of random sequences. The completeness measure reveals new insights about these models, including how much room there is for improving their predictions.

Date: 2022
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