This project focuses on the critique of the “rationality of expectations hypothesis” (REH). The REH assumes that economic agents have an unbiased, statistically correct, view of the future. This critique applies to many areas of analysis, notably the study of financial markets and the study of macroeconomics. Indeed, most theories in finance, as well as in macroeconomics, have tended to adopt REH axiomatically. It has become more and more clear that the subject of expectational coordination is a blind spot in our understanding of economics in general, of financial markets and macroeconomics in particular. We believe that the REH, in its standard version, is a key ingredient of the excessive optimism that economic theory currently conveys regarding the working of the financial system. This excessive optimism has fuelled the excessive confidence in the self-regulating capabilities of the system, which, as is now argued by many, is at the heart of its recent failures.
The objectives of the network and its expected activities
Meetings for the exploration and the exchange of ideas on the subjects outlined above will be organized at the central nodes of the Network. The network will strive to be a vector of dissemination of knowledge and a forum for discussions, and also to attract younger colleagues.
The project’s headquarters will be in Paris, at the Paris School of Economics and at the College de France, but the network is organized around nodes, led by a node leader. The node leaders are the governing body of the network.
NYU node, Leader: J. Benhabib
Oregon node, Leader: G. Evans
Paris node, Leader, R. Guesnerie, plus a social science (economic history + sociology) sub-node, P.C Hautcoeur.
Zurich node, Leader: T. Hens
Amsterdam node, Leader C. Hommes
Santiago node, leader, A. Jofre
Stanford node, leader, M. Kurz
Barcelona node, Leader R. Marimon
Princeton node, leader, S. Morris
Tokyo node, leader D. Oyama
Israeli node, Leader E. Ben Porath
Columbia node, Leader, M. Woodford
Chinese node, Leader, HM. Wu