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HAYEK AND KIRZNER AT THE KEYNESIAN BEAUTY CONTEST

HAYEK AND KIRZNER AT THE KEYNESIAN BEAUTY CONTEST William . Butos° & Roger Koppl00 1. Introduction Unplanned order is the leading problem of economics. Its periodic failure is the leading problem of macroeconomics. Both problems are very much problems of expectations. How is possible that we can plan our affairs more or less harmoniously? And why is it that our plans periodically fail to cohere to the usual degree? How is it possible, in other words, that our expectations are generally more or less fulfilled yet sometimes go spectacularly wrong? Different solutions have been proposed to the problem of expectations. Today's most popular solution is based on the plausible assumption that people do the best they can. If so, the theory goes, we should imagine the errors in their parameter estimates to be distributed about the true mean. Otherwise, a profit can be got from knowing the sign of the bias; and no profit opportunity goes unnoticed for long. The rational-expectations modeling technique makes expectations endogenous and a function of observed data. This technique is not very useful when one wishes to explain systematic error. Another solution is based on the equally plausible assumption that people's expectations are thoughts about the future. If so, the theory http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal des Économistes et des Études Humaines de Gruyter

HAYEK AND KIRZNER AT THE KEYNESIAN BEAUTY CONTEST

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References (33)

Publisher
de Gruyter
Copyright
Copyright © 1999 by the
ISSN
2194-5799
eISSN
2153-1552
DOI
10.1515/jeeh-1999-2-305
Publisher site
See Article on Publisher Site

Abstract

William . Butos° & Roger Koppl00 1. Introduction Unplanned order is the leading problem of economics. Its periodic failure is the leading problem of macroeconomics. Both problems are very much problems of expectations. How is possible that we can plan our affairs more or less harmoniously? And why is it that our plans periodically fail to cohere to the usual degree? How is it possible, in other words, that our expectations are generally more or less fulfilled yet sometimes go spectacularly wrong? Different solutions have been proposed to the problem of expectations. Today's most popular solution is based on the plausible assumption that people do the best they can. If so, the theory goes, we should imagine the errors in their parameter estimates to be distributed about the true mean. Otherwise, a profit can be got from knowing the sign of the bias; and no profit opportunity goes unnoticed for long. The rational-expectations modeling technique makes expectations endogenous and a function of observed data. This technique is not very useful when one wishes to explain systematic error. Another solution is based on the equally plausible assumption that people's expectations are thoughts about the future. If so, the theory

Journal

Journal des Économistes et des Études Humaines – de Gruyter

Published: Jun 1, 1999

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