Bayesian learning and expectations formation: Anything goes

Max Albert

No 284, Discussion Papers, Series I from University of Konstanz, Department of Economics

Abstract: The paper proves that the Bayesian approach to learning and expectations formation implies no propositions that could conceivably be refuted by observation. For a (non-expanding) universe infinite in time but finite at any point of time, it is shown that by a suitable choice of priors, any betting strategy can be rationalized. Consequently, no sequence of future choices can be excluded on the basis of a decision maker's v. Neumann-Morgenstern utility function, her knowledge of past observations, and the assumption of Bayesian rationality. Since no betting strategy is irrational, Bayesianism is useless as a normative theory as well.

Keywords: Bayesianism; Bayesian learning; decision theory; expectations; learning; rational expectations; rationality; rationalizability; subjectively expected utility theory; subjective probability (search for similar items in EconPapers)
JEL-codes: B41 C11 D81 D83 D84 (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kondp1:284

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