Gooden, a writer and novelist, collects rules and principles related to politics, economics, the arts, sciences, physical survival, the internet, life and work, and laws of the land, such as the domino effect, Warren Buffett's rules, Rational Expectations Theory
, hemline theory, the Bechdel test, rules of journalism, rules of grammar and usage, writers' rules, the laws of sci-fi writers, planetary naming rules, the laws of thermodynamics, the Van Halen Principle, Murphy's Law, Jim Crow laws, three strikes law, and the Miranda rule.
Rational expectations theory
developed at a tune when the United States was grappling with high inflation.
The rational expectations critique against Austrian business cycle theory only really works if all--or at least an overwhelming majority of--entrepreneurs are "rational" in the very strict sense implied by rational expectations theory
. Introducing a reasonable handful of less "rational" entrepreneurs into the mix allows for the conclusions of Austrian business cycle theory to take hold--the "average entrepreneur" is of lower quality in the credit-expansion-driven boom than in normal times.
This principle extends even to the sphere of macroeconomics regarding topics such as the efficient market hypothesis and rational expectations theory
The rational expectations theory
requires ordinary people to know about, understand, and care about Bank of Japan policy.
The assertion seemed at odds with everything Bill taught us in graduate school at Brown--that, according to rational expectations theory
, more information should be better than less.
The end result is represented best by the idea of a Nash equilibrium, although other embodiments, such as modern Walrasianism, expected utility theory and rational expectations theory
, are also discussed.
Rational Expectations theory
, an article of faith for the true believer of conventional economics, denies that either the Federal Reserve System or the Federal Government can help steer the macroeconomy.
Each relaxes the traditional rational expectations theory
in a certain way.
Recall that Lucas (1976) questioned the ability of empirical economics to correctly model, test, or predict the economy based on his interpretation of rational expectations theory
. However, unlike more philosophical and methodological criticisms of econometrics, the LC is itself empiricall y testable.
Thomas Aquinas and rational expectations theory
, though, economics got entangled in a supply-and-demand chart and the topic of inquiry moved away from moral and ethical discourse to a value-sanitized mathematical exercise.
It is now well known that the application of rational expectations theory
to actual cases may, for instance, be unsuitable when there are systematic errors in the observed variables, when loss functions are not quadratic, or when variables are constrained to take only positive values.