I think this one makes the most sense, because intelligent people often overanalyze their decisions and therefore act too rationally. There is no way to combat the problem, though - the same people will be wary of the government once they are lied to the first time. -Megan Myers
The term describes the many economic situations in which the outcome depends partly on what people expect to happen. The rational expectations school believes that people are TOO rational. Essentially, they say that people are jaded and actively work to cancel policies.
i don't agree with this economic thought. most people don't think correctly, i mean really. look at all the druggies, corrupt politicians, gossipy girls, etc. most people just pick politicians by name recognition/physical appearance. how is that logical? it isn't. we are imperfect beings and make mistakes because we don't think through the end and the consequences, not because we over think.
Ok hook'em, when you look at these druggies... thats what you would expect of those certain people looking at their backgrounds, so they are acting rational... just one way to look at it. I feel like this school makes lots of since, but it seems a little to easy which makes people scared I think.
Backers of Rational Expectations argue that so many people act predictably that they in effect work against the general welfare. For example, during a recession people are expected to save more of their money, which they do, but in order to escape recession people must make the irrational choice of spending more of their money. Another side of this very imperfect theory asserts that over a long period of time, people who make the most well-informed, intelligent decisions on investments profit as much as people who make completely random, uninformed investments. -Ian Carroll
hook'em...that reasoning is a logical fallacy, it's boushi and you know it. Although I agree with your first part in saying that this is almost a completely wrong form of economic thought. It's like saying Inter Milan will win the Champion's League this year because they won last year...disregarding any other deviation/errors from the current point standings. Besides, we should perfectly well know that FC Barca will win in the end...correct me if I'm wrong. Visca el Barça i visca Catalunya!!!
I think the only difference between this school and behavioral economics is your definition of "rational". People today generally behave in a way that's counter-intuitive to the principles of macroeconomics and government policy. But at least they are consistent in doing so- so that makes them rational in a way..
Rational school of thought makes sense on larger terms. If someone says recession, people save all of their money in fear of the dreaded r-word, yet that's the exact opposite of what we need to do. People are extremely predictable and act in their own self interest, so the government has a hard time implementing policies that are supposed to be counter-cyclical, so the economy kind of gets stuck.
The rational expectation school seems logical. People in general act rationally. It can be said that we act too rationally at times. This rationality only applies to a person's individual position rather than the economy as a whole. In order to advance countercyclical policy, the government essentially lies. however, the population becomes jaded and grows weary of the government.
The one thing between this and Behavioral Thought is the fact that they're both pretty wide open...each is entitled to their own interpretation. I guess that's actually pretty ironic, seeing as each school discusses the effect of human actions on the economy. To say that people generally think this way or that way is just plain shooting in the dark; it's nearly impossible to pinpoint a human reaction.
The behaviorists and rationalists represent the two extremes in which economics is perceived. If random actions of the uninformed peoples cancel out the educated actions of the professionals, then what's the need of studying the extremes of a "net zero" scenario.
As people are lied to who they should trust the most it is only expected that the people would act in ways that would counter act the government. The government should not just lie in words but in actions. Bring down prices for a little time and then people will buy. Then as people spend the economy would still increase and then prices can be raised slowly again
People act in their own self interest, defeating government efforts to maintain the economy. The only way to overcome this is to provide false information to the citizens, but they will only be tricked once.
Rational Expectations School deals with people making decisions that will help them the most. The government combats this by basically lying to the citizens, however they can only do this one time.
this school of thought seems to counter a lot of what behavioral economists say about people and what we can expect from people. They say that people are too rational, but to me it really just seems that it is the economists are being to rational or thinking to critically. I think i lik the idea that humans are irrational, or affected by too many factors to be tracked, better than the idea that we are too rational. we arent machines after all
Rational Expectation School is when everyone thinks rationally when making decisions ecomoically. If there are ever errors, they occur randomly instead of because of irrational thinking or any emotions added.
The rational expectation is when the outcome depends partly on what people expect to happen. The school of thought is the most reliable because most humans make rational, predictable decisions that will mirror their self-interest.
The rational expectation school makes the most sense to me because it is the most reliable, because it acknoledges that people sometimes act "too" rationally. I think it especially applies today because as we are in a recession, we want to save our money and make sure we have enough in the future. (technically rational) However, acting in the purpose to jumpstart the economy would be to start spending.
I feel like most people are thinking too much in the micro sense in saying that people make completely rational decisions. This is true, but in the macro sense, I don't think this is accurate. In general, people make rational decisions for themselves, but not for the economy. Sure there are the intelligent bunch that know what their actions will do for the economy , but I would say that the majority of the population are not smart enough for that.
I believe that the rational expectations school of thought is just completely wrong. People do not act rationally as a whole, this a statistically proven fact. This is shown through that the government has to the public in order to get them to do what is economically sound. If we were to act rationally the lying factor wouldn't even be necessary.
Macro rational is not the same as micro rational. For the government, it would be rational for people to spend in a recession to get out of it, but people as individuals realize that it's a pretty terrible time to spend, and save instead. Drama!
This comment has been removed by the author.
ReplyDeleteI think this one makes the most sense, because intelligent people often overanalyze their decisions and therefore act too rationally. There is no way to combat the problem, though - the same people will be wary of the government once they are lied to the first time. -Megan Myers
ReplyDeleteThe term describes the many economic situations in which the outcome depends partly on what people expect to happen. The rational expectations school believes that people are TOO rational. Essentially, they say that people are jaded and actively work to cancel policies.
ReplyDeletei don't agree with this economic thought. most people don't think correctly, i mean really. look at all the druggies, corrupt politicians, gossipy girls, etc. most people just pick politicians by name recognition/physical appearance. how is that logical? it isn't. we are imperfect beings and make mistakes because we don't think through the end and the consequences, not because we over think.
ReplyDeleteOk hook'em, when you look at these druggies... thats what you would expect of those certain people looking at their backgrounds, so they are acting rational... just one way to look at it. I feel like this school makes lots of since, but it seems a little to easy which makes people scared I think.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteBackers of Rational Expectations argue that so many people act predictably that they in effect work against the general welfare. For example, during a recession people are expected to save more of their money, which they do, but in order to escape recession people must make the irrational choice of spending more of their money. Another side of this very imperfect theory asserts that over a long period of time, people who make the most well-informed, intelligent decisions on investments profit as much as people who make completely random, uninformed investments. -Ian Carroll
ReplyDeletehook'em...that reasoning is a logical fallacy, it's boushi and you know it. Although I agree with your first part in saying that this is almost a completely wrong form of economic thought. It's like saying Inter Milan will win the Champion's League this year because they won last year...disregarding any other deviation/errors from the current point standings. Besides, we should perfectly well know that FC Barca will win in the end...correct me if I'm wrong. Visca el Barça i visca Catalunya!!!
ReplyDeleteI think the only difference between this school and behavioral economics is your definition of "rational". People today generally behave in a way that's counter-intuitive to the principles of macroeconomics and government policy. But at least they are consistent in doing so- so that makes them rational in a way..
ReplyDeleteRational school of thought makes sense on larger terms. If someone says recession, people save all of their money in fear of the dreaded r-word, yet that's the exact opposite of what we need to do. People are extremely predictable and act in their own self interest, so the government has a hard time implementing policies that are supposed to be counter-cyclical, so the economy kind of gets stuck.
ReplyDeleteThe rational expectation school seems logical. People in general act rationally. It can be said that we act too rationally at times. This rationality only applies to a person's individual position rather than the economy as a whole. In order to advance countercyclical policy, the government essentially lies. however, the population becomes jaded and grows weary of the government.
ReplyDeleteThe one thing between this and Behavioral Thought is the fact that they're both pretty wide open...each is entitled to their own interpretation. I guess that's actually pretty ironic, seeing as each school discusses the effect of human actions on the economy. To say that people generally think this way or that way is just plain shooting in the dark; it's nearly impossible to pinpoint a human reaction.
ReplyDeleteThe behaviorists and rationalists represent the two extremes in which economics is perceived. If random actions of the uninformed peoples cancel out the educated actions of the professionals, then what's the need of studying the extremes of a "net zero" scenario.
ReplyDeleteAs people are lied to who they should trust the most it is only expected that the people would act in ways that would counter act the government. The government should not just lie in words but in actions. Bring down prices for a little time and then people will buy. Then as people spend the economy would still increase and then prices can be raised slowly again
ReplyDeletePeople act in their own self interest, defeating government efforts to maintain the economy. The only way to overcome this is to provide false information to the citizens, but they will only be tricked once.
ReplyDeleteRational Expectations School deals with people making decisions that will help them the most. The government combats this by basically lying to the citizens, however they can only do this one time.
ReplyDeletethis school of thought seems to counter a lot of what behavioral economists say about people and what we can expect from people. They say that people are too rational, but to me it really just seems that it is the economists are being to rational or thinking to critically. I think i lik the idea that humans are irrational, or affected by too many factors to be tracked, better than the idea that we are too rational. we arent machines after all
ReplyDeleteRational Expectation School is when everyone thinks rationally when making decisions ecomoically. If there are ever errors, they occur randomly instead of because of irrational thinking or any emotions added.
ReplyDeleteThe rational expectation is when the outcome depends partly on what people expect to happen. The school of thought is the most reliable because most humans make rational, predictable decisions that will mirror their self-interest.
ReplyDeleteThe rational expectation school makes the most sense to me because it is the most reliable, because it acknoledges that people sometimes act "too" rationally. I think it especially applies today because as we are in a recession, we want to save our money and make sure we have enough in the future. (technically rational) However, acting in the purpose to jumpstart the economy would be to start spending.
ReplyDeleteI feel like most people are thinking too much in the micro sense in saying that people make completely rational decisions. This is true, but in the macro sense, I don't think this is accurate. In general, people make rational decisions for themselves, but not for the economy. Sure there are the intelligent bunch that know what their actions will do for the economy , but I would say that the majority of the population are not smart enough for that.
ReplyDeleteI believe that the rational expectations school of thought is just completely wrong. People do not act rationally as a whole, this a statistically proven fact. This is shown through that the government has to the public in order to get them to do what is economically sound. If we were to act rationally the lying factor wouldn't even be necessary.
ReplyDeleteMacro rational is not the same as micro rational. For the government, it would be rational for people to spend in a recession to get out of it, but people as individuals realize that it's a pretty terrible time to spend, and save instead. Drama!
ReplyDelete