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Learning to Become Rational Markus Zenner

Learning to Become Rational By Markus Zenner

Learning to Become Rational by Markus Zenner

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This is a study on the asymptotic behaviour of boundedly rational learning procedures in self-referential models. It reports important results of current research on this topic, results which extend the boundedly rational learning appraoch.

Learning to Become Rational Summary

Learning to Become Rational: The Case of Self-Referential Autoregressive and Non-Stationary Models by Markus Zenner

1. 1 Rational Expectations and Learning to Become Rational A characteristic feature of dynamic economic models is that, if future states of the economy are uncertain, the expectations of agents mat ter. Producers have to decide today which amount of a good they will produce not knowing what demand will be tomorrow. Consumers have to decide what they spend for consumption today not knowing what prices will prevail tomorrow. Adopting the neo-classical point of view that economic agents are 'rational' in the sense that they behave in their own best interest given their expectations about future states of the ecomomy it is usually assumed that agents are Bayesian deci sion makers. But, as LUCAS points out, there remains an element of indeterminacy: Unfortunately, the general hypothesis that economic agents are Bayesian decision makers has, in many applications, lit tle empirical content: without some way of infering what an agent's subjective view of the future is, this hypothesis is of no help in understanding his behavior. Even psychotic behavior can be (and today, is) understood as rational, given a sufficiently abnormal view of relevant probabili ties. To practice economics, we need some way (short of psychoanalysis, one hopes) of understanding which decision problem agents are solving. (LucAs (1977, p. 15)) 2 CHAPTER 1. INTRODUCTION 1. 1.

Table of Contents

Contents: Introduction.- Univariate AR(1) Models.- Unvariate ARX Models.- Unvariate Non-Stationary Models.- Multivariate ARX Models.- Multivariate Non-Stationary Models.- Appendix: Unvariate Autoregressions with Time-Varying Parameters.

Additional information

Learning to Become Rational: The Case of Self-Referential Autoregressive and Non-Stationary Models by Markus Zenner
Springer-Verlag Berlin and Heidelberg GmbH & Co. KG
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