is rational expectations worthy of an economic school of thought

Discussion in 'Economics' started by morganist, Jan 5, 2010.

  1. i was just thinking that the reaction to the labour market reduction from a decline in a fall of demand is the main division on economic thought. it is however just one aspect of economic theory is this justified that the segregation of economic thinking should be based in the main in this.

    if you think about it there are other reasons necessitating demand control for example controlling value of currency internationally and maintaining the value of return in the case of inflation and in the case of deflation the consistency of repayment. thus demand requires intervention regardless of what school of thought you believe in.

    my point being is the argument to stimulate or not stimulate redundant. should we be basing the division of economic thinking in other ways.

    i find the rational expectation debate almost pointless there will be times when intervention is needed regardless of stimulation due to the reasons above. i admit it does have some importance to prevent over stimulation.

    although there are other important economic arguments. should the argument be what mechanism should be used or to regulate or not to regulate.

    what do you think.
  2. We have a guy who runs a diner ( Probably seat 100 people), I'd say it is first class, big menu and well run operation. Well things are slowing down and he has even closed a little early somedays.

    He owns a strip mall nearby and a larger tenant moved out (flooring co) last fall. In the strip mall is another family restaurant that is not really competition to the diner (seafood, bar etc). Recently changed hands probably sold for 750k.

    In the mall is a combination butcher, deli, gourmet foods stuffs (italian) this guy runs a great business. He supplies the meats and plenty of stuff to the diner and the family restaurant.

    The guy who owns the strip mall and diner is doubling the rent on the butcher. Probably because he has a fair idea of the butchers gross sales and also to compensate for his own loss of a strip mall tenant and lower diner sales.

    The butcher is going to toss it in and retire. Closiing the butcher will probably put about 15 people out of work, the mall will lose another tenant and both restaurants will have to scramble to find good meat to supply their restaurants.

    There is no happy ending.