There is something about autumn that makes me nostalgic. I was thinking about my old Economics 101 text, Samuelson and Nordhaus Economics 12th edition. I took a look at our latest edition, the 18th, to refresh my memory and reassure myself that man is a rational entity.
Samuelson’s Economics is old-school these days, being in print from 1948 to the final 19th edition in 2009, which was also the year Samuelson died at 94 years of age. Chapter Thirty-three describes the foundations of the “new classical macroeconomics” put forth by Robert Lucas (Chicago), Robert Barro (Harvard) and others; ideas based on fundamental assumptions of classical economics like the flexibility of wages and prices but adding “assumptions of rational expectations”, assuming that people use all available information in making their decisions. “The second and new assumption (rational expectations) draws upon modern developments in areas such as statistics and behavior under uncertainty.”
For a full analysis of the pro and con of economic assumptions you can read the other thirty odd chapters of Economics, or a history of the boom, bubble, and bust of the past few economic crashes, a case study of the failure of Enron and Long Term Capital, or some of the titles listed below.
Is man a rational creature? This is a very pertinent question in economics, a good ghost story, and in the Library during the Halloween season.