In a message dated 11/11/02 10:42:47 AM, [EMAIL PROTECTED] writes: << --- [EMAIL PROTECTED] wrote: > Yes. Somewhere along the line someone--either the most ardents adherents > or the most disingenuous opponents--has defined "rational expectations" as meaning that people are perfect prognosticators, omnicient not only about > past conditions, but about future conditons as well. Under the > definition nobody has "rational expectations." <
Who has said this? Do you have a source? Rational expectations does not assume perfect knowledge, but only proposes that people will use available knowledge, include expectations about policy makers and other actors, and not make consistent errors. But what is not so commonly realized is that the term "rational" in "rational expectations" has a different meaning than general "rationality" in economics. Fred Foldvary >> It's implicitin Bill Wickens' argument that a little forced savings is a good thing, that college students are "irrational" because they don't have his level of knowledge of differences in returns from degrees in various subjects. I also have some PhD program collegues here at GMU who believe the same thing. I haven't run into any professors here yet who believe it, although perhaps Walter Williams implied it when he suggested that to believe people are fooled by the money illusion is to believe they're stupid. Actually, now that I think about it, when Snowden, et al discuss the real businsess cycle theory of the new classical economics they essentially paint a picture of economists who believe in perfect prognostication. The choice of the term "rational" to mean systematically goal-oriented has had powerful rhetorical benefits for economics, but has also caused confusion and subjected economics to derision from critics like Bill Wickens who challenge the "rationality" of something they deed unwise, such as playing video games instead of getting an engineering degree. The expression "rational expectations" has further rhetorical advantages (especially in the economics profession) and increases the level of confusion if it employs "rational" in yet a third way. Snowden et al did not, to my awareness, explain the difference; would you do so Fred? Thank you. David
