Expectations in Macroeconomics Adaptive versus Eductive Learning

Rational expectations solutions to macroeconomic models are equilibria requiring the coordination of expectations, and one can investigate the local stability of these solutions under alternative learning rules. Eductive (mental) approaches to learning have somewhat stricter stability conditions than do adaptive (statistical) approaches, as we illustrate using three economic models. The expectational stability principle can be used to understand the relationship between the corresponding stability conditions. This principle also provides insight into the persistent learning dynamics that can arise under modified adaptive learning rules.