Rational Expectations: Retrospect and Prospect

Kevin Hoover & Warren Young
Publication Number: 

The transcript of a panel discussion marking the fiftieth anniversary of John Muth’s 

“Rational Expectations and the Theory of Price Movements” (Econometrica 1961).  The 

panel consists of Michael Lovell, Robert Lucas, Dale Mortensen, Robert Shiller, and Neil 

Wallace.  The discussion is moderated by Kevin Hoover and Warren Young.  The panel 

touches on a wide variety of issues related to the rational-expectations hypothesis, 

including:  its history, starting with Muth’s work at Carnegie Tech; its methodological 

role; applications to policy; its relationship to behavioral economics; its role in the recent 

financial crisis; and its likely future