Bounded rationality and expectations in economics
Ignazio Visco () and
Giordano Zevi ()
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Ignazio Visco: Bank of Italy
Giordano Zevi: Bank of Italy
No 575, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area
Starting from Simon’s bounded rationality notion, in this study we consider some of the links between concepts of bounded rationality and the approaches followed by economists in their analysis of the role played by economic agents’ expectations in driving the evolution of the economy through time. We argue that the degree of attention devoted to the formation of expectations by the macroeconomic theory has followed high and low cycles. In recent years, the increasing availability of survey data and the failings of models based on purely rational representative agents have prompted renewed interest in inquiries into the direct measurement of expectations and empirical studies of their formation. The intellectual legacy of Herbert Simon provides a useful guide for both these activities.
Keywords: bounded rationality; expectations; Herbert Simon (search for similar items in EconPapers)
JEL-codes: B3 D80 D9 E71 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-evo, nep-hme, nep-hpe, nep-ore and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_575_20
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