Re: Keynes on rational expectations

[RHolt1234@xxxxxxx]

Here I agree both with Paul and Ted. The elite do not have any special insight
or rational understanding of the future of the economy, but they can through
their power and political position develop institutional structures to protect
the economy from going to extreme positions. I remember years ago Paul giving
a talk, where I believe he said, that we should look at the economy as a long
corridor where we throw down a ball. The ball will bounce off the wall and how
and where the ball will go we are not quite sure, but we can control the width
of the corridor. The same with the economy. I've always interpreted Keynes as
saying that the power of the elite is their ability to form institutional
rules and structures in which the economy can bounce off within reasonable
limits without having a catastrophe. Dave Colander, along with Randy Wray, has
really pushed the importance of these institutional factors, and constantly
reminds us of their importance.
But I also agree with Ted that in the short run, Keynes did believe that
individuals might be able to interpret correctly the direction of the market.
Some people are better at it  than others, and we pay these people a lot of
money. But we also have to remember that Keynes also lost and gained a lot of
money on the market. His "rational expectation" wasn't perfect.
-Ric Holt