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  • Re: Critique of Rational Expectations

    [quote]No offense, but introducing far-flung make-believe analogies generates more heat than light.[/quote] I realize that you may be dis-inclined to read the thing, but having to work with concrete examples sheds light on what's really going on behind concepts. Just repeatedly regurgitating the arguments of others leads me to think you haven't
    Posted to Economics Questions (Forum) by edward_1313 on Tue, Oct 5 2010
  • Re: Critique of Rational Expectations

    [quote]How do you know whether a price accurately reflects the value of the underlying asset or not? You are assuming that you can objectively know whether or not a price is 'right' or 'wrong'.[/quote] justin, if you read my example carefully you'll notice that I make the ASSUMPTION that the slips diverge from the true value. This
    Posted to Economics Questions (Forum) by edward_1313 on Tue, Oct 5 2010
  • Re: Critique of Rational Expectations

    [quote user="StrangeLoop"]If we assume that market interaction generates the most accurate prices, then could expectations be anything other than rational? If so, please explain (rather than simply praise Hayek and insist he would not endorse rational expectations). I wasn't attempting to hijack Hayek; rather, I was attempting to inquire
    Posted to Economics Questions (Forum) by edward_1313 on Tue, Oct 5 2010
  • Re: Critique of Rational Expectations

    [quote user="StrangeLoop"] That is, do you agree with Hayek?[/quote] If there is anyone who had a truly deep understanding of 'expectations' and their place in the market structure, it was Hayek. And he maintained that understanding simultaneously with his expansion of the theory of the cycle. I would not invoke Hayek as being on your
    Posted to Economics Questions (Forum) by edward_1313 on Tue, Oct 5 2010
  • Re: Critique of Rational Expectations

    [quote user="StrangeLoop"]edward_1313, do you believe market participants, through their interaction, determine the most reliable prices that could be developed? That is, do you agree with Hayek?[/quote] PLEASE REREAD THE PREVIOUS ARGUMENTS CAREFULLY. This reveals that you're not grasping the essence of the matter. The possibility of business
    Posted to Economics Questions (Forum) by edward_1313 on Tue, Oct 5 2010
  • Re: Critique of Rational Expectations

    [quote user="StrangeLoop"]Esuric, if expectations aren't rational, then what are they? Irrational? Inefficient? [/quote] I've been trying to think of a good example that would illustrate how RE applies to the real world, because the mathematical concept can only be strictly applied under completely unrealistic assumptions, e.g., all
    Posted to Economics Questions (Forum) by edward_1313 on Sun, Oct 3 2010
  • Re: A Question to Free Bankers

    [quote]If they hold (higher) cash balances then the circulation (or velocity/transactions) of money slows down, and this retards the process by which banks create deposits. If the demand for money is low, on the other hand, then money circulates quickly (because they're not holding onto large cash balances), and banks are able to create deposits
    Posted to Economics Questions (Forum) by edward_1313 on Thu, Sep 30 2010
  • Re: A Question to Free Bankers

    My point is not that changes in the demand for money necessitate a change in the natural rate. On the contrary, I am in complete agreement with the three-fold classification of money, consumption, and saving, and I am trying to use this distinction to probe at the weakness of the free bankers argument. My 3 case scenario says that we can say, a priori
    Posted to Economics Questions (Forum) by edward_1313 on Thu, Sep 30 2010
  • Re: A Question to Free Bankers

    [quote user="scineram"]This does not reduce the interest rate. You supply less funds for the bank, as it cannot use the redirected 10% as freely as previously, but it has to keep some of it on hand. Thus it can invest less.[/quote] You're also conflating saving with something that necessarily enters the bank market. A reduction in saving
    Posted to Economics Questions (Forum) by edward_1313 on Thu, Sep 30 2010
  • Re: A Question to Free Bankers

    [quote user="Merlin"]Interesting topic. Now, how exactly could people demand more money while, say, at the same time experiencing falling time preferences? If more money are drawn from (lapsing) time deposits, how on earth could natural rates not rise? (assume a constant monetary supply) In general, how do we claim that the demand for money
    Posted to Economics Questions (Forum) by edward_1313 on Thu, Sep 30 2010
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