The Evolving Rationality of Rational Expectations: An Assessment of Thomas Sargent's Achievements (Historical Perspectives on Modern Economics)

The Evolving Rationality of Rational Expectations: An Assessment of Thomas Sargent's Achievements (Historical Perspectives on Modern Economics)

Esther-Mirjam Sent

Language: English

Pages: 256

ISBN: 0521571642

Format: PDF / Kindle (mobi) / ePub

Inspired by recent developments in science studies, Professor Sent offers an innovative type of analysis of the recent history of rational expectations economics. In the course of exploring the multiple dimensions of rational expectations analysis, she focuses on the work of Thomas Sargent, an instrumental pioneer in the development of this school of thought. The treatment aims to illuminate some of the shifting negotiations and alliances that characterize the rise and shift of direction in rational expectations economics.



















you still need to have very rational agents. You mean if we attribute . . . . Somewhat, somewhat smart. Do you expect to do more work in rational expectations? Even given all the problems that you yourself indicated, do you still think that's a better research agenda than bounded rationality? They're at very different stages, so rational expectations and rational expectations econometrics now is a bunch of tools that you can use on applied problems and it's ready to go. It's like a 486 PC. You

Federal Reserve Bank of Minneapolis. In Klamer (1983), both Sargent and Townsend mention that Wallace taught them how to attack problems. In my interview with him on November 16,1992, Wallace made a case for a budget view of decisions made by economists. He argued for giving their work a rationale that makes sense in terms of the idea that there is a time limit to answer a question and only a certain budget to expend. 38 In his personal letter dated October 30,1996, Roll argues that the

surrounded by economists who were using the concept of rational expectations, taking the idea that individuals should not make systematic errors as their point of departure. The interpretation of the concept of rational expectations differed among its proponents, and even some of the individual economists changed their renditions. In his interview with Arjo Klamer (1983), Sargent said: "I was really influenced by a number of colleagues such as Neil Wallace and Chris Sims at the University of

suggests others. Indeed, if we were to endorse an ontological account, a quick look at symmetry in physics would teach us that symmetry's essential nature has five fundamental manifestations: reproducibility, predictability, evolution of isolated physical systems, symmetry of states of physical systems, and gauge symmetry (see Rosen 1990). Now, for example, reproducibility and predictability would mean that agents, economists, and econometricians all react in the same way to a certain change. As

rationality theory postulated a satisficing strategy, which sought to identify, in theory and in actual behavior, procedures for choosing that were computationally simpler, and argued that individuals picked the first choice that met a preset acceptance criterion. Simon's interpretation of bounded rationality was different from Sargent's, since it was shaped by different interests and moves. Simon (1991) wrote in his biography: "Actually, to say that I retreated from the Graduate School of

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