Criticisms of this economic theory include the problem of how to choose between multiple economic models, as well as its underlying assumption of perfect market clearing.
Criticisms of this economic theory include the problem of how to choose between multiple economic models, as well as its underlying assumption of perfect market clearing. It was first introduced in 1961 by John Muth to explain why no successful model had ever been devised to predict prices in speculative markets, but gained its current importance when its most famous advocate and Thomas Sargent independently applied it to the macroeconomic problems of the early 1970s, concluding that a policy-neutral government approach to the economy was ideal. FTP, what is this theory that government economic actions only duplicate those taken by the private sector, most associated with Robert Lucas?
Criticisms of this economic theory include the problem of how to choose between multiple economic models, as well as its underlying assumption of perfect market clearing.
rational expectations