The Learnability Criterion and Monetary Policy

only if expectations are consistent with actual outcomes. But, how is it that economic actors could come to possess rational expectations if they do not initially possess detailed knowledge concerning the nature of equilibrium in the economy or economic situation in which they find themselves?1 Several key papers in the 1980s, including Bray (1982), Evans (1985), Lucas (1987), and Marcet and Sargent (1989a,b), explored an idea concerning one resolution of this question. The idea was that, indeed, economic actors cannot be expected to initially know the nature of the equilibrium of the economy in which they operate. Instead, they have a perception of the equilibrium law of motion, and they use available data generated by the economy itself to update their perceived law of motion using recursive algorithms, INTRODUCTION Overview