INTRODUCTION
Although there has recently been a revival of some broadly “Keynesian” ideas and concepts in marcoeconomics, under the label of “New Keynesianism” (Colander, 1988), the so-called rational expectations hypothesis (REH) remains a major element in these theories.1 By now, it is widely accepted by both “New Keynesian” and “New Classical” economists that the REH has entirely supplanted the adaptive expectations hypothesis (AEH), of (e.g.) Cagan (1956) and Nerlove (1958), even though the latter was the mainstay of most orthodox models for some two decades.
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Bibliographic citation: Omar F. Hamouda and John N. Smithin, “Rational Behavior with Deficient Foresight”, Eastern Economic Journal Volume XIV, No 3, July-Sept 1988, pp. 277-285.