Those theoretical models have held up to quite a bit of empirical scrutiny, and almost perfectly so in highly competitive markets like crops, energy (production, not distribution), housing, etc. I would say that the models have remained simplistic because economists have been trained to recognize the conditions when the theoretical models break down.<p>Competition (or lack of it) is absolutely the number one area where the simplistic models break down, with psychological phenomena being a close second. Even where there is demonstrated and measured irrationality in individual decisions though, in aggregate the distortion effects tend to be minimized.<p>Outside of these known areas of completixity and modeling deficiency, there have been several major breakthroughs in modeling and understanding other seemingly puzzling factors. Matching problems, search frictions, moral repugnance, game theory, asymmetric information, and discrete choices. There have been huge advances since the 1950&#x27;s, it just takes some time to catch up with it all.