We show how standard learning rules can be interpreted as small departures from rationality in the context of an asset pricing model. We propose a distinction between ‘internal rationality’, as agents that maximize discounted expected utility under uncertainty given consistent beliefs about the future, and ‘external rationality’as agents that know perfectly the true stochastic process for funda...

We consider optimal monetary policy in New Keynesian models with inertia. First order conditions, which we call the MJBalternative, are found to improve upon the timeless perspective. The MJB-alternative is shown to be the best possible in the sense that it minimizes policymakers’ unconditional expected loss, and further, it is numerically found to offer significant improvement over the timeles...

In a simple conceptual framework, we organize a multitude of phenomena related to the (mis)prediction of utility. Consequences in terms of distorted choices and lower wellbeing emerge if people have to trade-off between alternatives that are characterized by attributes satisfying extrinsic desires and alternatives serving intrinsic needs. Thereby the neglect of asymmetries in adaptation is prop...

Economic Satisfaction and Income Rank in Small Neighbourhoods We contribute to the literature on well-being and comparisons by appealing to new Danish data dividing the country up into around 9,000 small neighbourhoods. Administrative data provides us with the income of every person in each of these neighbourhoods. This income information is matched to demographic and economic satisfaction vari...

In this paper we study the adaptive rational equilibrium dynamics in a simple asset pricing model introduced by Brock and Hommes (System Dynamics in Economic and Financial Models, Wiley, Chichester, 1997, pp. 3}44; Journal of Economic Dynamics and Control, 22, 1998, 1235}1274). Traders have heterogeneous expectations concerning future prices and update their beliefs according to a risk adjusted...

Correlation Neglect in Belief Formation Many information structures generate correlated rather than mutually independent signals, the news media being a prime example. This paper shows experimentally that in such contexts many people neglect these correlations in the updating process and treat correlated information as independent. In consequence, people’s beliefs are excessively sensitive to w...

Rational expectations models have increasingly been replaced by models with various forms of learning. This paper studies the global dynamics of a model of renewable resource markets due to Hommes and Rosser [Macroecon. Dyn. 5 (2001) 180] under adaptive and statistical learning systems. The statistical learning system is seen to generate greater complexity of the structures of the basins of att...

Ensembl Bacteria [3], Protists [4], Fungi [5], Plants [6] and Metazoa [7] (collectively, ‘Ensembl Genomes’) are five portals for genome-scale data, developed in close collaboration with scientific communities expert in the biology of individual species. Implemented using the Ensembl software suite for genome analysis and browsing, which was developed for the study of vertebrate genomes (describ...

We investigate the relationship between low-level incidents of political violence and communication patterns seven months after the 2012 Ivorian Civil War using network traffic from all of Orange Telecom’s Côte d’Ivoire cell towers and 500,000 randomly sampled cell phone subscribers. We first show that in the days preceding small violent incidents, mobile phone call volumes increase by 10% and ...

Job Satisfaction and Co-worker Wages: Status or Signal? This paper uses matched employer-employee panel data to show that individual job satisfaction is higher when other workers in the same establishment are better-paid. This runs contrary to a large literature which has found evidence of income comparisons in subjective well-being. We argue that the difference hinges on the nature of the refe...