The authors show that individuals' errors in identifying the relationships among variables cause downward biases in the aggregate that are equivalent to the public underestimating the strengths of the true relationships. They argue that rational expectations has considered only the...

The authors' note shows that the level of risk-sharing is not likely to increase when a deficit is created. A certain level of insurance can as easily be accomplished under a balanced budget or under a surplus, and the creation of a deficit does not provide a superior means, and probably an...

Several recent empirical studies have challenged the conventional wisdom that deficits cause a higher interest rate. Many economists are, however, critical of the seemingly implied theoretical justification--that every individual fully recognizes the size of the deficit and the extent to which...