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.
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The Great Inflation and Its Aftermath: The Past and Future of American Affluence
Production of Commodities by Means of Commodities: Prelude to a Critique of Economic Theory
Free to Choose: A Personal Statement
social, cultural, and political resources from Introduction 17 society at large entered into the very form and content of Sargent's scientific claims and played a significant part in their acceptance. The following chapters sometimes establish the connection between Sargent's research and the wider society by means of direct social contact between Sargent and others. In addition, they illustrate that the link can also arise in a more diffuse way through Sargent's ability to select from and
rational expectations economics in the late 1960s to early 1970s. An argument is made for his interest in achieving what he would regard as conceptual integrity of the determinism in neoclassical economic theory and the randomness in econometrics. This involves providing a narrative of how he came to the idea of rational expectations and what he had to relinquish to be able to put his initial interpretation of the concept to use. However, before focusing on Sargent, it is important to consider
self-referential aspect of economic systems gives rise to enormous theoretical problems of indeterminacy (i.e., multiple equilibria) when people's expectations are left as "free variables" that are not restricted by economic theory. To fight that threat of indeterminacy, economists have embraced the hypothesis of rational expectations. (Marcet and Sargent 1992, p. 139)11 For Sargent (1987c), "Rational expectations is an equilibrium concept that can be applied to dynamic economic models that have
structure exhibited by the money creation-inflation process during the seven hyperinflations studied Accommodating Prediction 65 by Cagan" (p. 60). He concluded, "since changes in the stochastic process for money creation are supposed to produce predictable changes in the stochastic process for inflation, money 'causes' inflation" (p. 62). The second piece of evidence is that in his collaboration with Sims, Sargent also kept stressing the economic models leading to vector autoregressions.
economists or econometricians" (Sargent 1993, p. 22).32 Or, "the agents in the model [are] more like the econometrician" (p. 22) and "the economist will assume that he is modeling sets of people whose behavior is determined by the same principles that he is using to model them" (p. 24). The extension of symmetry with the free move to artificial Accommodating Learning 145 intelligence led Sargent to reexamine the connection he was trying to establish between traditional econometrics and