🚀 go-pugleaf

In article <1993Jan25.141513.21131@csi.uottawa.ca> cbbrowne@csi.uottawa.ca (Christopher Browne) writes:
|In article <1993Jan24.163027.3144@athena.mit.edu> cmk@athena.mit.edu (Charles M Kozierok) writes:
|>In article <1993Jan23.182032.28056@csi.uottawa.ca> cbbrowne@csi.uottawa.ca (Christopher Browne) writes:
|>>In article <1993Jan23.165450.9818@athena.mit.edu> cmk@athena.mit.edu (Charles M Kozierok) writes:
|>>>an illusion which creates a deceptive situation deserves as much
|>>>of the blame (at least) as those it fools. even if most of the populace
|>>>should know better, they don't -- as such, that is one drawback of
|>>>inflation.
|>>
|>>After the fairly extensive amount of inflation which people have seen
|>>particularly over the past 100 years, it is NOT likely that there are
|>>many people who are unaware of the presence of inflation.
|>>
|>>It's difficult to decieve people who ARE aware that inflation exists.
|>
|>i disagree, though i don't think either of us can prove it. when inflation
|>pushes both wages and prices higher, i think most people only see
|>inflation as pushing prices higher, and that they somehow "deserve" the
|>full amount of their wage increase.
|
|It's well nigh unto impossible to analyze your assertion, as it does
|not represent the "rational expectations" that economics normally
|assumes.  Assuming "irrational expectations" allows you to assume
|essentially anything that you want, and makes it terribly difficult to
|come to ANY conclusions.
|

Rational Expectations are quite irrational. It is irrational to assume
people know apriori the model and the parameters of the economy. However.
you are correct that economics normally assumes Rational Expectations.
However, you can get nearly any result you want with an RE model provided you
specify the right constraints. Money illusion could be the result of
information or contractual asymetries. It could be signaling problems
or imperfect information if you like. Irrational expectations, such as
bounded rationality may give you what you want: which is a theory that
seems consistent with the economic data of high inflation and output.
-- 
"There is nothing in the marginal conditions that     
    distinguish a mountain from a mole hill"            
                      Kenneth Boulding                             

					All comments  are mine---(David Wright) 
						david@cats.ucsc.edu.