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Irrational Expectations


  • Stout, Lynn
  • Library, Cornell


3 Legal Theory 227 (1997) Rational expectations models have become a staple of economic theory and the basis for a Nobel Prize. This article argues that rational expectations analysis suffers from potentially fatal flaws that seriously undermine its value in understanding many market phenomena. Using the example of financial markets, the article illustrates how the rational expectations approach has worked to obscure, rather than to illuminate, our understanding of speculation and speculative markets. This misguidance raises problems for law and policy.

Suggested Citation

  • Stout, Lynn & Library, Cornell, 2018. "Irrational Expectations," LawArXiv aq63c, Center for Open Science.
  • Handle: RePEc:osf:lawarx:aq63c
    DOI: 10.31219/

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