Free-market economists proclaim (Chang, 2010) markets should be left alone since all actors are very well aware of their own interests and environment. In other words, market participants are assumed to be rational in participating in the market. Intervention or regulations of any kind can only produce sub-optimal outcomes, as outsiders(, such as the government) possess inferior information.

However, Chang (2010) argues that people are limited by their ‘bounded rationality’, as we can only comprehend complex issues and matter to a certain extent. For many things, we cannot calculate the contingencies or probabilities due to our limited capability to process certain information. Considering rationality is a key assumption in markets we cannot expect the model to work and anticipate optimal outcomes by leaving things to the market. Therefore, according to Chang, regulations are a necessity to deliberately reduce and simplify the complexity of problems and activities most of us face. Regulations have often been proven to be effective, not because the makers possess superior knowledge, but because it restricts choices and reduces the complexity of problems. Consequently, it limits the possible events that may go wrong.

Rationality and regulations
When we first read about regulations in Chang his book it seems like an excellent solution to a complex problem. However, Lodge & Wegrich (2016) examined a clear paradox of rationality in this line of reasoning, which is utilising rational tools in a world of bounded rationality. It is highly remarkable that bounded rationality is carried out to bring rationality to regulations and policy, without acknowledging the conditions of bounded rationality and displaying little self-awareness of its own limitations.

Firstly, the paper, states the government overcomes bounded rationality by exploiting its superior resources, in which no reasoning failures can occur. Secondly, it is claimed that governments’ limitations cannot be investigated in equal terms to the limited decision-making of individuals. Despite superior resources being well exploited, these actors are, in fact, just as individuals boundedly rational as a result of uncertainty and ‘rules of the thumb’, resulting in a sub-optimal. As reported by
Lodge & Wegrich (2016), sub-optimal outcomes may occur due to a range of sources, such as transaction costs, dealing with bounded knowledge, error-prone assumptions and pursuing short-term interests. For both the government and any other outsider, intentional actions or policy may therefore quickly lead to unforeseen consequences.

Nevertheless, we should still carry out regulations and policy, because it prevents those who are bounded rational from making a costly mistake and causes only little harm to more rational actors (Camerer, et al., 2003). It steers actors in such a way that their welfare is maximised. However, it is important to pay attention to prevent random, arbitrary or harmful effects to construct a scenario, in which welfare is promoted (Thaler & Sunstein, 2003). Agents that are perfectly conscious of their alternatives of choice may not appreciate these alternatives and categorization to a certain extent, but it seems almost imminent that something must be lost if it is to take place through regulations and policy (Chapman, 2003). As also concluded by Chang (2010), some rationality may need to be lost when we are limited by policy and categorical constraints in choice making, but there are also benefits that arise from categorization and regulations. Comparison of all possible alternatives would be incomprehensible and particularity of choice would be unthinkable without any categorical constraints. We need policies to reduce ‘the general’ to the ‘particular’, all under the guise of a more fully rational choice.
Models in the contemporary world
Chang (2010) also states economic instruments should be banned unless we can fully comprehend their workings and their effect on the rest of the economy. In short, banning all the complex economic models whose working we cannot yet understand. According to Chang, economic models should be tested as if they were drugs, cars, etc. We may only apply those models to the ‘real world’ if they are tested rigorously to be confident they have the expected results and are entirely certain that the
benefits outweigh the negative implications. Much has been said about the importance of introducing better evidence and incorporating research standards and benchmarks similar to medicine and statistics into the world of real policy. However,
these experiments themselves rest on thin foundations. Social experiments are much more complex than the supposedly controlled environments of medical experiments, even if one tries to disregard the sampling biases that construct those experiments (Lodge & Wegrich, 2016). In terms of the future, it is unreasonable to expect research and models to eventually incorporate all specifics of a social environment (Lodge & Waggish, 2016) and foresee the future. Moreover, economics as an inexact science was never meant to look into the future, but rather to make approximations. Besides, economics will always be subjected to mixed up values and facts (Boumans & Davis, 2016). Economics must, in fact, incorporate value judgements to give a rather more representative view of the world. Economics always seeks to explain and inform us on how our economic life, concerns, interests and values work. A value-free economy would never be applicable because it does not tell us anything about those interests, values, et cetera. Economic explanations must, therefore, include the fact that economic actors possess ethical values and the impact of these moral norms on the shape of the economy. The value-ladenness of economic concepts, the economics point of view, is what makes economics what it is, a thoroughly normative system.

Conclusion
Everything taken into account, we are clearly not ‘smart (rational)’ enough to leave things to the market and neither is the government. Policies and regulations may first look like a paradox and may have some flaws, but as Chang suggested they are clearly in the interest of all actors and prevent us from making harmful choices and pursuing our self-interests. Moreover, these policies and regulations enable us to make a distinction between alternatives and comprehend them in a rather more rational
way instead of looking at all possible alternatives without any particularity of choice. Besides, we are also not smart enough to fully comprehend economic models and to include all variables we are working with, which might leave us with unintended consequences and serious complications. However, contrary to Chang his view, we cannot accurately test and examine economic
models like any other exact science, such as biology and physics. In economics, a thoroughly normative science, models consist of values, interest, behaviour and ethics in order to present ‘the economic point of view’, which cannot be easily included in a model. It may be best if we alter our expectations according to the nature of the science in combination with a little modesty the earlier economists taught us. ‘Earlier economists ... recognized the economy’s complexity and were very modest in their claims
about the usefulness of their models ... They built this modesty into their policy advice and told policy makers that the most we can expect from models is half-truths’ (Boumans and Davis, 2016, pp. 217)

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