Expectations in Past and Modern Economic Theory. Foreword

Abstract

This topic is not really new. Every economist or person interested by economic activity knows the crucial direct or indirect importance of the forecasts or views that decision makers hold about future prices, sales, incomes, profitability or other key microeconomic or macroeconomic magnitudes. As many commentators (see, for instance, Leijonhufvud [1986: 4]) mentioned, the central difference between economics and natural sciences precisely lies in the forward-looking predictions and decisions made by economic agents since certainty and determinism do not often prevail in the working of the economic system. Therefore, the analysis of the contents and the impact of expectations on the micro- and the macro-economic variables is complex and often requires sophisticated reflections and tools as well as the use of the contributions of other natural (mathematics, physics) or social (psychology, sociology, philosophy) sciences. This is the reason why expectations provide a basic building block of economic theory. Notably they lie at the core of economic dynamics as they usually determine, not only the behavior of the agents, but also the main properties of the economy related to the evolution of these behavior in time. A central aspect of economic theories is indeed that expectations influence the time path of the economy, and conversely it must be the case that time path influences expectations.