The best way to think about RE is that it is a consistency stricture
that says that the agents in your model of the economy should not be
less informed than you are. If you know the model then they should too
and the equilibrium defined accordingly.
Note that this perspective leaves it open as to whether you do know
the model! If you write down a system whereby there is more than one
possible model of the economy then it is actually easy to get repeated
"errors" - this raises issue of learning etc.
Alex
--
Alexander Tabarrok
Department of Economics, MSN 1D3
George Mason University
Fairfax, VA, 22030
Tel. 703-993-2314
and
Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621
Tel. 510-632-1366
