The Simonian bounded rationality hypothesis and the expectation formation mechanism
AbstractAbstract. In the 1980s and at beginning of the 1990s the debate on expectation formation mechanism was dominated by the rational expectation hypothesis. Later on, more interest was directed towards alternative approaches to expectations analysis, mainly based on the bounded rationality paradigm introduced earlier by Herbert A. Simon. The bounded rationality approach is used here to describe the way expectations might be formed by different agents. Furthermore, three main hypotheses, namely adaptive, rational and bounded ones are being compared and used to indicate why time lags in economic policy prevail and are variable. JEL Codes: D78, D84, H30, E00.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 33981.
Date of creation: 2002
Date of revision:
Publication status: Published in Poznan Unversity of Economics Review Number 1, 2002.Volume(2002): pp. 5-24
Keywords: bounded rationality; substantive and procedural rationality; expectation formation; adaptive and rational expectations; time lags;
Find related papers by JEL classification:
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- E00 - Macroeconomics and Monetary Economics - - General - - - General
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