We review how realistic frictions in information and/or rationality arrest general equilibrium (GE) feedbacks. In one specification, we maintain rational expectations but remove common knowledge of aggregate shocks. In another, we replace rational expectations with Level-k Thinking or a smooth...

This paper argues that skill formation is a life-cycle process and develops the implications of this insight for Scottish social policy. Families are major producers of skills, and a successful policy needs to promote effective families and to supplement failing ones. Targeted early...