The Rationality of ‚Rational Expectations‘
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The Rationality of ‚Rational Expectations‘
Credit and Capital Markets – Kredit und Kapital, Vol. 16(1983), Iss. 2 : pp. 172–183
5 Citations (CrossRef)
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Machlup, Fritz
Cited By
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The Early History of Rational and Implicit Expectations
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Abstract
The Rationality of ‘Rational Expectations’
Whereas the construct “equilibrium of expectations” and the notions of “induced revisions of expectations” and “convergence of expectations” are useful in the analysis of adjustment processes, the strong form of “rational expectations” is found to be an untenable hypothesis. That anticipated changes in policy may have no effects on production is not questioned, but the explanation by hypothesizing identical interpretations of all available information on the basis of identical theories entertained by all agents and analysts is unacceptable. The auxiliary hypothesis that economic agents, public and private, can derive rational expectations from consulting statistical time series and relying on statistical averages is equally irrational.