- 17 октября 2018, 16:13
- Brad DeLong's Grasping Reality with Both Hands
Economic agents as harried triage nurses grabbing for an immediate diagnosis from the salient features of the case in front of them; Nicola Gennaioli and Andrei Shleifer: Diagnostic Expectations: "Diagnostic expectations are represented by a linear combination of the rational expectations of 𝜔𝑡+1 held at 𝑡 and at 𝑡 − 1:
It is not that decision-makers compute rational expectations and combine them.... Rather, oversampling representative future states yields the linear combination in (4). This formula reflects a “kernel of truth” logic: diagnostic expectations differ from rational expectations by a shift in the direction of the information received at 𝑡, given by [𝔼𝑡(𝜔𝑡+1) − 𝔼𝑡−1(𝜔𝑡+1)]...
#shouldread #expectatiobs #economicsgoneright