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Expectations are one of the core theoretical concepts in the history of 20th century macroeconomics and finance. Here another significant theory of expectations in intellectual history is noted – C. S. Peirce's theory of abductive expectations. Peirce was an American philosopher and scientist with deep interests in economics. The paper begins by reprising important aspects of prominent expectations theories such as rational and adaptive expectations, and the theories of Keynes, Friedman and Cagan. Then the discussion extends to other noted contributors such as Shackle, Coddington, Hayek, Evans, and Brock. C. S. Peirce's theory of expectations is intertwined with his writings on many subjects. What was important about human thought for Peirce was that inferences were made about the logic of events unfolding towards the future. Such inferences look to the future and their accompanying reasoning processes were interpreted as expectational inferences. Peirce used the term abduction for hypothetically imagining the future. An abductive, conjectural expectation (ACE) is one which incorporates and surpasses known evidence by contingently and hypothetically contemplating the future. For Peirce, abductive expectations are a crucial part of humanity's most efficient and productive resource, the cognitive processes of the human mind. Also, although Peirce is recognized as a founding influence on American institutional economics, his conception of expectations seems to have been left undeveloped by that school of economic ideas. Peirce's contribution provides new insights and a more unifying perspective on expectations theories in the history of economics. [ABSTRACT FROM AUTHOR]

Motivation and method: Existing rational expectations models cannot satisfactorily explain why political budget manipulations systematically raise re-election chances and only occur in “specific contexts”. This paper offers a theoretical explanation by including unsophisticated voters into an opportunistic political cycle model; unsophisticated voters are unable to take the optimal behaviour of other agents (fully) into account, but may, nonetheless, vaguely suspect government deception. Results: First, rationally expected manipulations are, on average, fruitless in equilibrium. By including unsophisticated voters we can, however, corroborate empirically found electoral effects of political budget manipulations. Second, unsophisticated voters become anxious and suspicious in an intransparent or uncertain world, but the government tries to “outperform” their scepticism by increasing budget manipulations in order to appear more competent and, ultimately, increase re-election chances. It is, therefore, not surprising that political budget cycles are observed in countries suffering from intransparencies such as developing countries or new democracies. Third and in addition, the model presented here predicts that political opportunism produces, unintentionally, a countercyclical policy effect in election years, thereby, for instance, alleviating the typical problem of policy procyclicality in developing countries. Additional contribution: The paper also offers a theoretical explanation for political distortions found in forecasts by US states. Based on overly optimistic revenue forecasts the incumbent state government can conduct expansionary fiscal policies in order to appear more competent prior to an upcoming election. Since the resulting deficit can only be observed afterwards, the government can effectively circumvent a constitutional balanced budget constraint. As a result, there are political forecast and budget cycles in the state. More generally, however, these findings may also apply to European countries where balanced budget constraints are or will be in place (for instance the debt brakes in Switzerland and Germany); similarly, they apply to the supra-national European Fiscal Compact of the European Union. [ABSTRACT FROM AUTHOR]

The PhD forms a watershed period where candidates' professional identities are formed, and their career aspirations and expectations are developed. Yet little is known about Australian geography doctoral students' career aspirations and expectations. Drawing on findings from a 2016 survey of those students, the paper establishes that while a majority of students aspire to work in academia, many also feel quite pessimistic about their prospects of being able to do so. The paper argues that the uncertainty and anxiety that many Australian geography doctoral students feel about their future careers is the product of a wider cultural shift that is occurring in relation to the purpose of the research doctorate. Geographers need to critically engage with these changes and the academic subjectivities they are producing to ensure that, as a discipline, geography continues to make a positive contribution to the careers of the individuals who undertake these degrees. [ABSTRACT FROM AUTHOR]

En este estudio se analiza la dinámica reciente de la inflación brasileña considerando distintas hipótesis de expectativas para observar la manera en que un posible comportamiento discrecional de la autoridad monetaria puede interferir en las expectativas con miras al futuro de los agentes y la forma en que esa interferencia puede afectar la respuesta de la inflación a su componente inercial y a las oscilaciones en los ciclos económicos en el marco de la curva de Phillips neokeynesiana. Para ello se realizan estimaciones de dicha curva y de su versión híbrida con el método generalizado de momentos (MGM) consistente en presencia de heterocedasticidad y autocorrelación. Los resultados sugieren que, en una hipótesis de menor previsibilidad de los agentes, la inflación será más sensible a las oscilaciones en los ciclos económicos cuanto mayor sea su componente inercial. [ABSTRACT FROM AUTHOR]

The article analyzes the economic theories of Herbert Gintis. It discusses topics including the Arrow–Debreu model, general equilibrium theory, and rational expectations. Gintis' theories on topics including heterogeneous economic agents, macroeconomics, and agent-based economic models are also discussed.

Monetary uncertainty may cause the demand for money to increase or the velocity of money to fall. This is the so-called Friedman's hypothesis. This hypothesis has received mixed empirical support in the literature, thereby necessitating further examination. An important issue in the literature is that the existing studies have mainly focused on developed economies when testing Friedman's hypothesis. The few studies focusing on developing countries have mainly tested the stability of the demand for money function. However, how monetary uncertainty determines the behaviour of the demand for money function is equally important. In this paper, we tested Friedman's hypothesis by focusing on a developing country, thereby adding to the existing literature. Using a technique which allows us to differentiate short-run impact from long-run impact, we examined the impact of monetary uncertainty on the money demand in Ghana during the period 1990Q1 to 2016Q3. In addition, we assessed the stability of the demand for money function in this country. We found that monetary uncertainty has a negative and significant impact on the demand for money in both the short and the long run. This finding refutes Friedman's hypothesis. The implication of this finding is that the public prefers to hold safer assets to cash money during periods of monetary uncertainty in Ghana. Finally, we found evidence in support of a stable demand for money function in Ghana. One implication of the stable demand for money function in the country is that monetary policy aimed at smoothing the growth rates of monetary aggregates could enhance the stability of the economy by ruling out monetary policy as a source of uncertainty. The other is that, because a stable demand for money function implies the demand for money changes in a predictable fashion, the central bank may be able to achieve the objectives of the inflation-targeting framework that it is currently practising. [ABSTRACT FROM AUTHOR]

The economy is open and never in true equilibrium due to the exchanges with outside. However, most of the quantitative studies have been focused on the equilibrium economy. Despite of the recent efforts, it is still challenging to formulate a quantitative theory for uncovering the principles of non-equilibrium open economy. In this study, we developed a landscape and flux theory for non-equilibrium economy. We quantified the states of economy and identify the multi-stable states as the basins of attractions on the underlying landscape. We found the global driving force of the non-equilibrium economy is determined by both the underlying landscape gradient and the curl probability flux measuring the degree of non-equilibriumness through the detailed balance breaking. The non-equilibrium thermodynamics, the global stability, the optimal path and speed of the non-equilibrium economy can be formulated and quantified. In the conventional economy, the supply and demand usually has only one equilibrium. By considering nonlinear supply–demand dynamics, we found that both bi-stable states and limit cycle oscillations can emerge. By shifting the slope of demand curve, we can see how the bi-stability transforms to the limit cycle dynamics and vice versa. By parallel shifting the demand curve, we can also see how the monopoly, the competition, and the bistable monopoly and competition states emerge and transform to one other. We can also see how the mono-stable monopoly, the limit cycle and the mono-stable competition states emerge and transform to one another. [ABSTRACT FROM AUTHOR]

Increasing evidence shows that in the aftermath of the global financial crisis, in the euro area, the relationship between price inflation and economic slack became stronger. Instead, there is no clear evidence of a strong(er) relationship between wage inflation and unemployment. In this paper, we estimate a Phillips curve with time-varying coefficients separately for Italy, Spain, Germany and France and we find that, with the exception of Germany, after the global financial crisis, the sensitivity of hourly wage changes to labour market slack increased. Second, by the use of administrative microdata, available only for Italy, we relate daily wage changes to the local unemployment rate. The results confirm the steepening of the Phillips curve after 2008, also when controlling for composition effects. [ABSTRACT FROM AUTHOR]

In this paper we analyze the role of expected labor and marriage market returns as determinants of the college enrollment decisions of Mexican high school graduates. Moreover, we investigate whether the (relative) weights of these factors differ by gender. We use data on individuals’ expectations regarding future labor market outcomes which we directly elicited from the youths, and two different measures of marriage market returns. First, marriage market returns are proxied by the (net-)supply of potential partners in the youths’ local marriage markets. Second, we use data which elicits youths’ beliefs about their future spouse's earnings conditional on their own education level. We find that labor market as well as marriage market returns are important determinants of the college enrollment decision. However, boys’ and girls’ preferences differ in terms of the relative role of the two determinants, in that the relative weight of labor market versus marriage market returns is larger for boys than for girls. [ABSTRACT FROM AUTHOR]

We run an experiment to investigate the emergence of excess and synchronised trading activity leading to market crashes. Although the environment clearly favours a buy-and-hold strategy, we observe that subjects trade too much, which is detrimental to their wealth given the implemented market impact (known to them). We find that preference for risk leads to higher activity rates and that price expectations are fully consistent with subjects’ actions. In particular, trading subjects try to make profits by playing a buy low, sell high strategy. Finally, we do not detect crashes driven by collective panic, but rather a weak but significant synchronisation of buy activity. [ABSTRACT FROM AUTHOR]

(1) Background: Why and when images of watching eyes encourage prosocial behavior is still subject to discussion, and two recent meta-analyses show no effect of watching eyes on generosity. This study aims to discern the effect of watching eyes of different valence on two separate aspects of prosocial behavior, and additionally investigates whether individuals’ social value orientation moderates the effect of eyes. (2) Methods: Individuals take on the role of either a first or second mover in an incentivized, anonymous sequential prisoner’s dilemma (n = 247), a two-person game which separates the need to form expectations about the other player (first mover cooperation, trust) from the motive of greed (second mover cooperation, reciprocity). During decision-making, a picture of either kind eyes, unkind eyes, or a control picture is presented above each decision matrix. (3) Results: The results indicate that unkind eyes, and not kind eyes, significantly boost first mover cooperation. In contrast, neither type of eye cues increase second mover cooperation. Social value orientation does not moderate these effects. (4) Conclusions: Thus, the data suggest that the valence of eye cues matters, and we propose that unkind eyes urge first movers to live up to the interaction partner’s expectations. [ABSTRACT FROM AUTHOR]

This study relates to the literature on the communication and clarity of the policymakers. The novelty concerns the investigation of the effect of the communication and clarity of the fiscal authority on market expectations on public debt. The article addresses empirical evidence, based on the Brazilian experience, regarding the idea that communication is essential for the coordination between the policymaker and the market participants in order to lead expectations. The findings suggest that the communications from the Brazilian National Treasury concerning fiscal policy represent an important tool to improve the effects of the management of the public debt on market expectations regarding public debt. [ABSTRACT FROM AUTHOR]

This article synthesises psychology, economics and political science theories that can explain market reaction to elections. In order to test the theories, we conduct event studies of the impact of elections on the interest rates on government bonds for 122 elections in 19 countries. The efficient market hypothesis states that rational markets immediately incorporate all information relevant to asset prices. According to psychology, human decision-making is quasi-rational. Market actors should be slow to accept evidence that conflicts with previously held opinions, leading them to under-react to new information. We show that markets under-react to elections and that under-reaction is greater in majoritarian countries because they provide more information to the market. Assuming fully rational markets underestimates the impact of elections and variations in impact across political systems. Most of the literature on market constraint assumes rational markets and may thus be underestimating the extent of market pressure in the aftermath of elections and its distribution across different types of electoral systems. Our results suggest that markets can calculate risk around elections, but are slow to do so, thereby suggesting that the role of uncertainty and the resort to heuristics is relatively minor. [ABSTRACT FROM AUTHOR]

In this paper, we introduce a method to automatically produce plausible image segmentation samples from a single expert segmentation. A probability distribution of image segmentation boundaries is defined as a Gaussian process, which leads to segmentations which are spatially coherent and consistent with the presence of salient borders in the image. The proposed approach is computationally efficient, and generates visually plausible samples. The variability between the samples is mainly governed by a parameter which may be correlated with a simple Dice’s coefficient, or easily set by the user from the definition of probable regions of interest. The method is extended to the case of several neighboring structures, but also to account for under or over segmentation, and the presence of excluded regions. We also detail a method to sample segmentations with more general non-stationary covariance functions which relies on supervoxels. Furthermore, we compare the generated segmentation samples with several manual clinical segmentations of a brain tumor. Finally, we show how this approach can have useful applications in the field of uncertainty quantification, and an illustration is provided in radiotherapy planning, where segmentation sampling is applied to both the clinical target volume and the organs at risk. [ABSTRACT FROM AUTHOR]

We present a plausible micro-founded model for the previously postulated power law finite time singular form of the crash hazard rate in the Johansen-Ledoit-Sornette (JLS) model of rational expectation bubbles. The model is based on a percolation picture of the network of traders and the concept that clusters of connected traders share the same opinion. The key ingredient is the notion that a shift of position from buyer to seller of a sufficiently large group of traders can trigger a crash. This provides a formula to estimate the crash hazard rate by summation over percolation clusters above a minimum size of a power (with ) of the cluster sizes , similarly to a generalized percolation susceptibility. The power of cluster sizes emerges from the super-linear dependence of group activity as a function of group size, previously documented in the literature. The crash hazard rate exhibits explosive finite time singular behaviors when the control parameter (fraction of occupied sites, or density of traders in the network) approaches the percolation threshold . Realistic dynamics are generated by modeling the density of traders on the percolation network by an Ornstein-Uhlenbeck process, whose memory controls the spontaneous excursion of the control parameter close to the critical region of bubble formation. Our numerical simulations recover the main stylized properties of the JLS model with intermittent explosive super-exponential bubbles interrupted by crashes. [ABSTRACT FROM AUTHOR]

We provide a new explanation for the stronger relationship between income and subjective wellbeing (SWB) found in cross-sectional versus panel studies based on the predictions of a rational expectations model of utility maximization with permanent and transitory income shocks. The model predicts that SWB is affected by unanticipated rather than anticipated income shocks, and is more influenced by permanent rather than transitory income shocks. We confirm the model predictions empirically by analyzing panel data from China, and show that differences in the relative importance of permanent income can explain the stronger (weaker) impact of income often found in cross-sectional (panel) estimation. We also empirically confirm asymmetric impacts of positive and negative transitory income shocks as predicted by a model with credit constraints. [ABSTRACT FROM AUTHOR]

The present study applies a business model framework to a water utility using a case study. A survey was developed and conducted with residential water customers in the City of Guelph, ON, Canada, with the objective of assessing their expectations in order to improve the business. Preferences differed by user type, underlining the benefit of distinguishing between customer segments (or user types) and customizing messaging. Users were not aware of all services covered by their water bill, and although expecting high quality services they did not support rate increases. Stakeholder collaborations could be used to improve awareness, offer decentralized solutions, and resolve issues collectively. [ABSTRACT FROM AUTHOR]

The most straightforward defense of political democracy is grounded in rational choice. Political democracy gives people power in public life parallel to that afforded by markets in private life: the power to turn their preferences into social outcomes. However, rational choice models of voter behavior dramatically underpredict voter turnout in all but the smallest elections. Fiorina (1990) has called this “the paradox that ate rational choice theory.” This anomaly is the centerpiece of Green and Shapiro's (1994) critique of rational choice methodology in political theory. This paper proposes a form of social rationality that strengthens the classical rational actor model. This concept explains many central statistical regularities concerning voter turnout and the historical regularities concerning collective action. [ABSTRACT FROM AUTHOR]

This paper examines the local impacts of shale gas development (SGD). We use a hedonic framework and exploit a discrete change in expectations about SGD caused by the New York State moratorium on hydraulic fracturing. Our research design combines difference-in-differences and border discontinuity, as well as underlying shale geology, on properties in Pennsylvania and New York. Results suggest that New York properties that were most likely to experience both the financial benefits and environmental consequences of SGD dropped in value 23% as a result of the moratorium, which under certain assumptions indicates a large and positive net valuation of SGD. [ABSTRACT FROM AUTHOR]

An improved Lorenz chaotic system is proposed, making it into a circuit which is easy to be implemented by using some basic electronic components. The antisynchronization error systems can be asymptotically stabilized at the origin with three different methods which are proposed to control the improved Lorenz system. Theoretical analyses and simulation results are given to demonstrate the feasibility and effectiveness of these proposed schemes. Then the hardware circuit for the proposed Lorenz system is implemented by repeated optimization design. Experimental results show that the circuit has good comprehensive performance. [ABSTRACT FROM AUTHOR]

Mainstream philosophy of economics assumes that steady regularities underlie the domain of economic phenomena which can be explained by the operation of mechanisms or socioeconomic machines. It is also considered that once operating those mechanisms don't need further interventions. This implies the assumption that the nature of socioeconomic processes is similar to the one of the natural sciences. Nevertheless, such regularities are usually examined in the light of some economic model, which often ends up losing contact with the real world. The present paper aims at putting in the center of the analysis another object of study: the economic processes based on expectations. In these processes the human action operates as a causal link between economic variables; such an action being the result of a previous building of expectations which are sensitive to the information of the context. It will be shown that the systematic intervention on the background conditions and expectations is fundamental in this kind of processes if what is sought is fulfilling a desired goal or managing a stable process. That intervention will not only require the knowledge provided by models but also an extra-theoretical or interdisciplinary knowledge. [ABSTRACT FROM AUTHOR]

Using data from England and Wales, we analyze the relationship between house prices and transaction volume (number of houses sold) and find that there is a negative relationship. When we decompose price changes into anticipated and unanticipated components we find that while anticipated house price changes positively affect transaction volume, unanticipated price changes have a negative effect. These findings give insights for the theories which try to explain the relationship between house prices and transaction volume. Our findings are inconsistent with the “down-payment effect” approach developed by Stein (1995) and Ortalo-Magne and Rady (2006), and with the “loss aversion behavior” approach discussed by Genesove and Mayer (2001). However, our results support the evidence of asymmetric decisions on the buyer and seller side documented in Case and Shiller (1988) and partially support the mechanisms in search and matching models. [ABSTRACT FROM AUTHOR]

Purpose – The main purpose of this paper is to address a key issue in literature on management and foresight: the author explores how firms might cope with the increased turbulence of the business environment. Design/methodology/approach – This paper is based on a multiple case study of major firms of the energy and the mobile communication industries. Findings – The focus is on strategic foresight and organizational flexibility: the author introduces the concept of “boundary uncertainty” and investigates its managerial implications. Originality/value – The main contribution of this paper is to expand our understanding of environmental uncertainty and to reinvigorate the study of strategic decision making in turbulent industries. The author provides descriptive data on the foresight approaches that some of the world’s largest and most influential companies used throughout the 2000s for remaining aligned with their fast-paced environments, and thus informs the debate between the “planning” and the “learning” schools of strategic management. [ABSTRACT FROM AUTHOR]

This study explores how relationship quality might mediate the link between transaction cost variables and export performance. In the proposed conceptual model, relationship-specific assets and uncertainty affect export performance both directly and through relationship quality; survey data from 185 exporting organizations in Bangladesh provide the test of this model. This article thus proposes that transaction cost economics and relational exchange theories are complementary rather than competing theories. These conclusions arise because this study accounts for not only the direct effect of asset specificity and uncertainty on export performance but also their indirect effects through relationship quality, which have not been empirically tested or clarified previously. [ABSTRACT FROM PUBLISHER]

This paper explores the determinants of 10-year sovereign bond spreads over the German Bund benchmark in the Euro Zone from 2000 to 2013, relying on cross-country quarterly data panel analysis. The paper focal point is the role of contagion and euro break-up risks in widening the sovereign bond yield differentials among EU member countries. Using a novel synthetic index capable of monitoring the sustainability of currency unions, the paper finds that market expectations of a euro’s break up and contagion from Greece were fundamental drivers of sovereign risk premia in peripheral countries. [ABSTRACT FROM PUBLISHER]

This study examines students' expectations about their final grade. An attempt is made to determine whether students form expectations rationally. Expectations in economics, rational or otherwise, carry valuable information and have important implications in terms of both teaching effectiveness and the role of grades as an incentive structure for students. This study focuses on the predictors of the students' final grade as they relate to their expectations. Our findings indicate that on average, the rational expectations (REs) framework does not accurately describe students' grade expectations. Expectations, although sluggish, improve as students gather information on their actual performance during the semester. Even though overconfidence is the norm, there could be some students who follow closely the REs hypothesis. [ABSTRACT FROM PUBLISHER]

Foster and Young (2003) provide a model of learning by hypothesis testing that spends almost all of the time approximating Nash equilibria of a repeated game. Here I extend this learning model to a macroeconomic setting, where agents' decisions are informed by hypotheses they hold regarding the economy. They periodically test these hypotheses against observed data, and replace them if they fail. Under certain conditions, agents who learn in this way spend a large fraction of the time approximating rational-expectations equilibria. [ABSTRACT FROM AUTHOR]

Harry Johnson's 1971 ideas about the factors affecting the success of the Keynesian Revolution and the Monetarist Counter-revolution are summarised and extended to the analysis of the Rational Expectations-New Classical (RE-NC) Revolution. It is then argued that whereas Monetarism brought about a revival of the quantity theory of money from the limbo into which Keynesianism had pushed it, RE-NC modelling was responsible for that theory's most recent disappearance. This happened despite the fact that, initially, RE-NC economics appeared to be a mainly technical extension and refinement of Monetarism, rather than a radically new economic doctrine. Some implications of this story for todays’ macroeconomics are briefly discussed. [ABSTRACT FROM PUBLISHER]

An essay on cautious conservatism, understood as the political doctrine that the status quo enjoys pride of place, is presented. Topics discussed include an aversion to general principles by theorists of political economy, dogmatic conservatism, and ad hoc conservatism, as well as presumptive conservatism. Also mentioned are unpredictability, irreversibility and systemic interconnectedness as allies of the status quo, as well as the moral dimension of conservatism.

That the rationality of individual people is ‘bounded’ – that is, finite in scope and representational reach, and constrained by the opportunity cost of time – cannot reasonably be controversial as an empirical matter. In this context, the paper addresses the question as to why, if economics is an empirical science, economists introduce bounds on the rationality of agents in their models only grudgingly and partially. The answer defended in the paper is that most economists are interested primarily in markets and only secondarily in the dynamics of individual decisions – specifically, they are interested in these dynamics mainly insofar as they might systematically influence the most useful approaches to modeling interesting markets. In market contexts, bounds on rationality are typically generated by institutional and informational properties specific to the market in question, which arise and are sustained by structural dynamics that do not originate in or reduce to individuals' decisions or psychological dispositions. To be sure, these influencesinteractwith psychological dispositions, so economists have reason to attend to the psychology of valuation. But nogeneralmodel of bounded rationality should ever be expected to feature in the economist's toolkit, regardless of the extent to which psychologists successfully identify specific human cognitive limitations. Use of moderate rational expectations assumptions should be understood in this light. Such assumptions are readily relaxed in specific applications, and in ways customized to modeling circumstances, that modelers, experimentalists, and econometricians are making steadily more sophisticated. [ABSTRACT FROM AUTHOR]

The full-information rational expectations model is clearly rejected by the data. The expectation formation process has therefore important implications for macroeconomic outcomes. We examine how consumers react to information provided by the media, by taking into account that this information is imperfect. We show that information rigidities play a role empirically. Intensive news reporting improves the accuracy of consumers’ inflation expectations, because they receive more information. However, this effect depends on the tone of the news. If news are badly toned, the effect reverts. [ABSTRACT FROM AUTHOR]

China's currency, the renminbi or yuan, is not freely convertible on international foreign exchange markets; foreign exchange is still heavily controlled in China even though major reforms swept the Chinese foreign exchange control regime in 2005. Whilst foreign exchange liberalisation reform is underway, uncertainties exist and the market has to have a second guess how further reform will move forward and whether the government will make a policy U-turn at a certain point. These uncertainties increase transaction costs and hinder China's deeper financial reform. [ABSTRACT FROM AUTHOR]

We study a standard model of economic agents on the nodes of a social network graph who learn a binary 'state of the world' $$S$$, from initial signals, by repeatedly observing each other's best guesses. Asymptotic learning is said to occur on a family of graphs $$G_n = (V_n,E_n)$$ with $$|V_n| \rightarrow \infty $$ if with probability tending to $$1$$ as $$n \rightarrow \infty $$ all agents in $$G_n$$ eventually estimate $$S$$ correctly. We identify sufficient conditions for asymptotic learning and contruct examples where learning does not occur when the conditions do not hold. [ABSTRACT FROM AUTHOR]

El artículo discurre sobre el concepto conocido como la hipótesis de expectativas racionales en los estudios macroeconómicos. La autora comenta sobre la historia de esta hipótesis desde los años 1970 y describe algunas de sus faltas, incluyendo el concepto del desequilibro y la política económica moderna.

Soros' theory of reflexivity is meant to apply to a variety of social processes. In economics, it implies that many processes will be subject to “boom-bust” patterns in which expected outcomes deviate for a considerable time from the actual path, and that the actual path in turn deviates from the underlying fundamentals. This is in sharp contrast to the reigning notions in orthodox economics. The hypothesis of Rational Expectations (RE) requires that the views of all participants will converge to a “single set correct of expectations” and the Efficient Market Hypothesis (EMH) posits that actual outcomes deviate from equilibrium in a random manner save for occasional exogenous shocks. In this paper I show that Soros' argument is similar to the classical and Keynesian notions of equilibration as a turbulent process in which actual and expected variables gravitate around some fundamental value. But Soros makes the important further contribution of emphasizing that the fundamental value itself will generally be affected, but not fully determined, by (diverse) expectations and actual outcomes. I demonstrate that Soros' theory of reflexivity can be formalized and that the resulting system is stable in in the sense that expected and actual variables will gravitate around a possibly moving fundamental value. The paper ends with a discussion of an alternate economic paradigm in which the principle of reflexivity would be central. [ABSTRACT FROM AUTHOR]

Nature does not care … whether we penetrate her secrets and establish successful theories about her workings and apply these theories successfully in predictions. In the social sciences, the matter is more complicated and in the following fact lies one of the fundamental differences between these two types of theories: the kind of economic theory that isknownto the participant in the economy has an effect on the economy … There is thus a “backcoupling” or “feedback” between the theory and the object of the theory, an interrelation which is definitely lacking in the natural sciences … In this area are great methodological problems worthy of careful analysis.” (Oskar Morgenstern, 1972, p. 707). [ABSTRACT FROM AUTHOR]

An introduction is presented in which the editor discusses various reports within the issue on topics including monetary policy reform, the Keynesian model for monetarist and Keynesian ideas related to interest rate rules, and the effects of central bank transparency on economic uncertainty.

Although the meltdown in the American financial system in 2008 created the most profound financial crisis in sixty years, the field of International Political Economy (IPE) has remained curiously silent. More worrisome is the inability of the paradigmatic approach to the study of IPE in the United States – Open Economy Politics (OEP) – to shed much light on the causes of the crisis. We develop the conceptual distinction between risk and uncertainty to explain why the rationalist (and largely materialist) “American School” of IPE failed so badly. OEP followed orthodox economics in conflating risk and uncertainty. Preserving the distinction, as constructivist IPE scholars and economic sociologists have done, enables us view the crisis through dual rationalist and sociological optics. Our illustrative evidence, drawn from public (the Federal Open Market Committee of the US Federal Reserve) and private actors (accountants, credit rating agencies, and arbitrage traders) in financial markets, shows that only eclectic approaches that make use of both rationalist and sociological optics give IPE scholars the depth of vision and the breadth of imagination necessary to make sense of the financial crisis of 2008. [ABSTRACT FROM PUBLISHER]

It is shown that the concept of concentration is of potential interest in the sensitivity study of some parameters and related estimators. Basic ideas are introduced for a real parameter θ>0 together with graphical representations using Lorenz curves of concentration. Examples based on the mean, standard deviation and variance are provided for some classical distributions. This concentration approach is also discussed in relation with influence functions. Special emphasis is given to the average concentration of an estimator which provides a sensitivity measure allowing one to compare several estimators of the same parameter. Properties of this measure are investigated through simulation studies and its practical interest is illustrated by examples based on the trimmed mean and the Winsorized variance. [ABSTRACT FROM AUTHOR]

Abstract: The Johansen–Ledoit–Sornette (JLS) model of rational expectation bubbles with finite-time singular crash hazard rates has been developed to describe the dynamics of financial bubbles and crashes. It has been applied successfully to a large variety of financial bubbles in many different markets. Having been developed over a decade ago, the JLS model has been studied, analyzed, used and criticized by several researchers. Much of this discussion is helpful for advancing the research. However, several serious misconceptions seem to be present within this literature both on theoretical and empirical aspects. Several of these problems stem from the fast evolution of the literature on the JLS model and related works. In the hope of removing possible misunderstanding and of catalyzing useful future developments, we summarize these common questions and criticisms concerning the JLS model and synthesize the current state of the art and existing best practice. [Copyright &y& Elsevier]

The study tests the policy irrelevance proposition in the inflation targeting monetary policy environment in South Africa, as well as in the context of a dichotomy between anticipated and unanticipated policy shocks. Findings from estimates of monetary policy reaction function confirmed that an open economy implicit Taylor rule characterised the monetary policy instrument in South Africa, providing evidence that suggests that the monetary policy has, indeed, been conducted systematically on the basis of information from past inflation and the output gap. While aggregates of evidence invalidates rational expectations' PIP proposition in South Africa, doubts exists about the capacity of inflation targeting monetary policy in curbing inflationary pressures in the economy. For policy, this study supports calls for supplementing the inflation targeting framework with targets for other real variables, such as output and employment. [ABSTRACT FROM AUTHOR]

The article presents the author's views on the life of unemployed people who are forced to smile in front of public. According to the author, no one can conceal their pain and fear as their social and economic security keeps on decreasing. He mentions that unemployed people should become more realistic and should be able to accept societal changes. He further discusses concept of neoliberalism which has degraded the personal expectations of workers. He also mentions that various factors contributes towards the political rationality including overproduction, global competition and increasing fuel cost.

The claim that Keynes makes a tacit assumption in Chapter 3 of The General Theory, that short-term expectations are fulfilled, is unwarranted and unnecessary. Kregel's seminal 1976 paper and its subsequent development by Chick and others have contributed to the general acceptance of this claim; these contributions are critically evaluated in the present paper. This critique clears the ground for a recognition that Keynes instead adopted the assumption of judicious foresight, which would now be called short-term rational expectations. That recognition in turn should encourage a reappraisal of Keynes's thought, by mainstream economists and others. [ABSTRACT FROM AUTHOR]

Construction of the first transcontinental railroad, financed with large federal subsidies, is an important event in American history. Were the subsidies necessary to induce private investment in the railroad? The ex-ante investment decision examined uses contemporary reports and a simulation model to show that investors expected the railroad to be profitable. Evidence also shows that the railroad created political conflicts in Congress between the North and South. The secession removed the South as a disputant in Congress, reducing short-term political conflict but not long-term conflict. Subsidies reduced political risk, rather than transport market failure, and encouraged private investment. [ABSTRACT FROM PUBLISHER]