If we want to have anything of interest to say on real economies, financial crisis and the decisions and choices real people make [in a non-ergodic world not amenable to stochastic modeling], it is high time to replace the rational expectations hypothesis with more relevant and realistic assumptions concerning economic agents and their expectations.The post shows why.
Do people have rational expectations?
Lars P. Syll | Professor, Malmö University
I like the way Syll says “Rational expectation economists are not particularly interested in empirical examinations of how real choices and decisions are made in real economies.”
ReplyDeleteIn plain English that’s : “A significant proportion of academic economists are not interested in reality: they’re more interested in setting up completely unrealistic models which they publish with a view to furthering their careers.”
Joseph Stiglitz made much the same point when he said “Ricardian equivalence is taught in every graduate school in the country. It is also sheer nonsense.”