Flat Earth Economics: The Far-reaching Consequences of Flat Payoff Functions in Economic Decision Making

Economists tend to emphasize the optimum, but in many cases, even large deviations from optimal decisions make little difference to the payoff. This has far-reaching implications that are under-recognized, including: (a) decision makers often have a wide margin for error in their production planning decisions, and flexibility to pursue factors not considered in the calculation of payoffs; (b) optimizing techniques are sometimes of limited practical relevance for decision support; (c) the value of information used to refine management decisions is often low; and (d) the benefits of using “precision farming” technologies to adjust production input levels are often low. Copyright 2006, Oxford University Press.