Forward-looking agents care about expected future utility flows, and hence have higher current felicity if they are optimistic. This paper studies utility-based biases in beliefs by supposing that beliefs maximize average felicity, optimally balancing this benefit of optimism against the costs of worse decision making. A small optimistic bias in beliefs typically leads to first-order gains in a...

The role of government expenditure is analyzed in the context of growing economy with endogenous labor supply and with investment adjustment costs. Assuming the dynasty model of representative consumer’s utility maximization i.e., the present value of over time felicity function maximization under the law of motion capital where felicity function depends consumption, leisure and government expe...

Experimental studies on children’s understanding of indefinite NPs and negation report a systematic non-adult interpretation of sentences like ‘‘The detective didn’t find some guys’’ (see Musolino 1998). In this article, we question whether these findings require a grammatical explanation. We draw upon the observation that negative statements are generally used to point out discrepancies betwee...

It is widely held that ordinary natural language conversations are governed by tacit conventions. called felicity conditions or conversational postulates (Austin. 1962: Grice. 1975: Gordon & Lakoff, 1975). Learning a procedural skill is also a communication act. The teacher communicates a procedure to the student over the course of several lessons. The central idea of the theory to be presented...