The randomness of rational expectations: a perspective on Sargent's early incentives^*

^*I am very thankful to Kenneth Arrow, Orazio Attanasio, John Dupre, Timothy Lenoir, Philip Mirowski, and an anonymous referee for helpful comments. I would like to thank participants of seminars at Michigan State University, University of Notre Dame, Stanford University, and Tinbergen Institute for helpful discussions. I am very grateful to Robert Blattberg, Deirdre McCloskey, John Meyer. Richard Roll, Thomas Sargent, and Neil Wallace for spending some time answering my questions.

Abstract

This paper searches for the story Thomas Sargent is likely to have told when he was trying to use rational expectations economics in the late-1960s and early 1970s. An argument will be 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.

Keywords:

• Thomas Sargent
• rational expectations economics
• lé stable distributions
• randomness
• determinism

^*I am very thankful to Kenneth Arrow, Orazio Attanasio, John Dupre, Timothy Lenoir, Philip Mirowski, and an anonymous referee for helpful comments. I would like to thank participants of seminars at Michigan State University, University of Notre Dame, Stanford University, and Tinbergen Institute for helpful discussions. I am very grateful to Robert Blattberg, Deirdre McCloskey, John Meyer. Richard Roll, Thomas Sargent, and Neil Wallace for spending some time answering my questions.

^*I am very thankful to Kenneth Arrow, Orazio Attanasio, John Dupre, Timothy Lenoir, Philip Mirowski, and an anonymous referee for helpful comments. I would like to thank participants of seminars at Michigan State University, University of Notre Dame, Stanford University, and Tinbergen Institute for helpful discussions. I am very grateful to Robert Blattberg, Deirdre McCloskey, John Meyer. Richard Roll, Thomas Sargent, and Neil Wallace for spending some time answering my questions.

Notes

^*I am very thankful to Kenneth Arrow, Orazio Attanasio, John Dupre, Timothy Lenoir, Philip Mirowski, and an anonymous referee for helpful comments. I would like to thank participants of seminars at Michigan State University, University of Notre Dame, Stanford University, and Tinbergen Institute for helpful discussions. I am very grateful to Robert Blattberg, Deirdre McCloskey, John Meyer. Richard Roll, Thomas Sargent, and Neil Wallace for spending some time answering my questions.