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2 - Accommodating Randomness

Published online by Cambridge University Press:  18 December 2009

Esther-Mirjam Sent
Affiliation:
University of Notre Dame, Indiana
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Summary

Fate, Time, Occasion, Chance and Change? To these

All things are subject but eternal Love.

Percy Bysshe Shelley, Prometheus Unbound

In this chapter, I focus on the story Sargent is likely to have told when he was trying to use rational expectations economics in the late 1960s to early 1970s. An argument is made for his interest in achieving what he would regard as conceptual integrity of the determinism in neoclassical economic theory and the randomness in econometrics. This involves providing a narrative of how he came to the idea of rational expectations and what he had to relinquish to be able to put his initial interpretation of the concept to use. However, before focusing on Sargent, it is important to consider the context within which he developed his ideas. The case study focuses on the tensions among probabilism, determinism, and randomness in philosophy, neoclassical economics and econometrics, and Sargent's work, comparing and contrasting these tensions. The intent is to braid the two narratives of, on the one hand, free and forced moves and, on the other hand, probabilism, determinism, and randomness. Section 2.1 gives a brief analysis of the general relationships among probabilism, determinism, and randomness; 2.2 discusses its treatment in neoclassical economics and econometrics. Section 2.3 looks at the free and forced moves made by Sargent in an effort to dissolve the tensions among probabilism, determinism, and randomness.

Type
Chapter
Information
The Evolving Rationality of Rational Expectations
An Assessment of Thomas Sargent's Achievements
, pp. 23 - 47
Publisher: Cambridge University Press
Print publication year: 1998

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  • Accommodating Randomness
  • Esther-Mirjam Sent, University of Notre Dame, Indiana
  • Book: The Evolving Rationality of Rational Expectations
  • Online publication: 18 December 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511528514.002
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  • Accommodating Randomness
  • Esther-Mirjam Sent, University of Notre Dame, Indiana
  • Book: The Evolving Rationality of Rational Expectations
  • Online publication: 18 December 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511528514.002
Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

  • Accommodating Randomness
  • Esther-Mirjam Sent, University of Notre Dame, Indiana
  • Book: The Evolving Rationality of Rational Expectations
  • Online publication: 18 December 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511528514.002
Available formats
×