Economy flawed Oct 30, 2009
A long line of research has shown that even using the models of the so-called "rational expectations" school of economics, markets might not be stable and there can be price bubbles. The crisis has, indeed, provided ample evidence that investors are far from rational; but the flaws in the rational expectations line of reasoning - hidden assumptions such as that all investors have the same information - had been exposed well before the crisis. (Sydney Morning Herald -- Business)
Bernanke Frets Over Sherlock Holmes's Next Stop: Caroline Baum Oct 19, 2009
Two years ago, fed up with the hijacking of the economics profession by rational expectations theory, I did an informal street survey on inflation expectations. The most popular answer to a question on the current rate of inflation was no clue. (Bloomberg -- Columnists)
* The dismal Nobel Oct 12, 2009
Economic history in the turgid and restricting form of retrospective econometrics was promoted by the 1993 award to Robert Fogel and Douglass North, while rational expectations theory was given a big boost by honoring Robert Lucas in 1995. The geographical distribution of the award both creates and reflects power hierarchies in the discipline. (Taipei Times, Taiwan -- World)
Odd facts about Nobel Prize winners Oct 7, 2009
Robert Lucas, winner of the 1995 Nobel Prize in Economics for his work on the theory of "rational expectations," split his $1 million prize with his ex-wife. If there were a Nobel Prize for Foresight or Timing, she should be nominated, based on a clause in their divorce settlement from seven years earlier: "Wife shall receive 50 percent of any Nobel Prize." The clause expired on October 31, 1995. (CNN)
There will be no recovery until debt tumour is excised Sep 15, 2009
Last year they did it again - only with methods they would have disparaged a mere year earlier (rational expectations macroeconomics, a modern neoclassical fad, preaches that government intervention cannot influence the level of economic activity at all - yet another belief that reality has recently crucified). This time, while the rescue has worked, the recovery they expect afterwards cannot happen - because there is almo 00004000 st no one left who will willingly take on any more debt. (Sydney Morning Herald -- Business)
Worst yet to come: White House economic advisor... Jul 12, 2009
The chief intellectual casualty of the current crisis has been the efficient markets school the theory, associated with such erstwhile laisser faire gurus as Alan Greenspan, that market participants are governed by rational expectations and markets are self-correcting. As an academic economist, Summers has studied the shortcomings of that approach but, working on Wall Street gave him, he says, a more visceral understanding of the self-referential character of markets: Markets... (The Drudge Report)
To be knave or brave? The choice tortures Hannity Apr 30, 2009
Our model predicts that rational expectations for higher interest rates under left-wing administrations decreases demand for stocks among traders, the professors write. This decrease in demand leads to a decline in stock price volatility not only during the incumbency of left-wing governments, but also when traders expect the left-wing party to win elections. (Atlanta Journal-Constitution -- Opinion)
The Death of Modern Finance Apr 1, 2009
And "rational expectations theory" attempts to explain why you want to buy more stock when the price goes up. Popular works by mainstream economists like Yale's Robert Schiller have already begun to broach many of the shortcomings of modern finance. (Human Events Online)
How to save the world Mar 30, 2009
Both neo-classical and New Keynesian macroeconomic frameworks depend on rational expectations, fed by the Great Moderation of post-WW2 decades in which there ultimately no longer proved to be space for uncertainty. Philosophically, information is freely fed into these models from the outside. (iAfrica.com)
Clashing ideologies behind financial crisis Mar 16, 2009
They believe government attempts to "manage" the macro economy are futile at best (because of fancy theories such as "rational expectations" and "Ricardian equivalence") and counterproductive at worst. (Of course, they're also mindful of the fact that the US already has a net public sector debt far exceeding 40 per cent of GDP, a constraint that doesn't apply to us. (Sydney Morning Herald -- Business)
Rebalancing the books Mar 11, 2009
The proximate cause of our problems today is the breaking of the US housing bubble, and the ultimate cause is the remarkably widespread belief in rational expectations: that economic man behaves like a logical machine that in turn causes markets to tend to efficiency and equilibrium. In such a world the tech bubble was rationalised by Alan Greenspan as an internet-driven productivity burst, and the housing bubble (in reality a 100-year event) was so preposterous an idea that Ben Bernanke could... (FT.com -- Markets)
Obama Brings a Taste of Chicago to Washington Feb 26, 2009
Chicago is home to, among other things, rational expectations theory, the idea that outcomes depend to some extent on what people expect to happen ... If we expect the future to be better, rational expectations dictate that it will be. (Bloomberg -- Columnists)
Cosgrove: Reasons Behind the Rise Feb 12, 2009
It was footballs national Signing Day for high school seniors, which in recent years has resembled the Day of the Dead in Westwood, and even the biggest Bruin optimists were steeling themselves with rational expectations of let-downs and being runner-up for some crucial prospects. But Coach Rick Neuheisel pulled off several last-minute coups, at the expense of USC no less, thus vaulting the 4-8 Bruins recruiting class into a top-five ranking. (BruinReportOnline.com)
