The Analysis of Producers' Expectations

THE economic theorist may not unreasonably regard the creation of new techniques of analysis as his most important task. Confident in the significance and importance of his theory he often values it primarily for its xsthetic qualities and is content to leave to others the verification of his assumptions. Now it is not denied that propositions whose truth is not susceptible of proof or disproof by reference to reality may yield light ; but their use is limited. The degree of confidence with which a theory can be applied to the solution of practical problems depends on whether it has been verified. Of no branch of economics is this more true than of that part of modern dynamics which deals with the nature of expectations. The applied economist whose task it is to verify theories and to assess their practical importance, is, therefore, confronted with difficult problems. It is not possible toobserve expectations'; it is not even possible to infer their precise nature except on the assumption of rational behaviour. This is perhaps the best line of approach. We can study what producers actually do and then, assuming that they act rationally, we may be able to infer what their expectations must have been.2 A priori it is extremely difficult to say how expectations will vary following any given change in the economic situation. Statistical evidence, if it could be obtained, would clearly be of great value. The aim of this paper is to examine the problems which arise when the statistical derivation of producers' expectations is attempted. It is at times possible to infer the direction in which expectations are moving by observing changes in certain

Business · Economics · Complex Systems and Time Series Analysis · Economic theories and models

• From the Firm to Economic Policy

  Elodie Bertrand•History of Political Economy•2015

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