From its inception in the marginal revolution of the 1880s, neoclassical economics has depended on the notion of a rational economic agent, a Homo economicus. Equally, the notion of rationality has been the focus of criticism from those wishing to dispute one or another aspect of mainstream...

We introduce endogenous information acquisition in an otherwise standard business cycle model. In our framework, information is a productive input, which is essentially specialized labor, so information acquisition is linked to the labor market and thereby the macroeconomic condition. Our paper...

When financial securities are modeled as claims on stochastic processes, each trader's beliefs at time can be summarized by a subjective probability distribution . The dominant Rational Expectations approach typically treats as a singleton that correctly gauges risks. In reality, financial risks...

Predictable polarization is everywhere. We can often predict the different directions that people’s opinions—including our own—will shift over time. Empirical studies suggest that this is so whenever evidence is ambiguous, a fact that’s often thought to demonstrate human bias or...