The paper analyzes the current discussions on the state of economics with special focus on the interrelationships between key ideas of economic theories and real actions of economic policy in the course of the global economic crisis. The global economic crisis showed the limited ability of...

This study takes up Keynes' ideas concerning long-term expectations, particularly his notion that expectations are subject to sudden changes with strong effects on economic activity. We start by detailing Keynes' views regarding the nature of expectations and their role in the business cycle. I...

We develop an equivalence between the equilibrium effects of incomplete information and those of two behavioral distortions: myopia, or extra discounting of the future; and anchoring of current behavior to past behavior, as in models with habit persistence or adjustment costs. We show how these...

Life span uncertainty (longevity risk) impacts several economic decisions. Individuals can form and revise their survival beliefs making use of behavioural heuristics. We propose a model of sentiment, in which individuals are assumed to switch between optimistic and pessimistic expectations on...

We modify the classic single-period inventory management problem by assuming that the newsvendor is expectation-based loss averse according to Koszegi and Rabin (2006, 2007). Expectation-based loss aversion leads to an endogenous psychological cost of leftovers as well as stockouts. If there are...