https://market.subwiki.org/w/index.php?action=history&feed=atom&title=Adaptive_expectations Adaptive expectations - Revision history 2026-04-28T06:43:24Z Revision history for this page on the wiki MediaWiki 1.41.2 https://market.subwiki.org/w/index.php?title=Adaptive_expectations&diff=272&oldid=prev Vipul: Created page with '==Definition== '''Adaptive expectations''' or '''adaptive behavior''' or '''backward-looking expectations''' refers to a phenomenon where people's expectations or projections of...' 2009-06-22T12:10:19Z <p>Created page with &#039;==Definition== &#039;&#039;&#039;Adaptive expectations&#039;&#039;&#039; or &#039;&#039;&#039;adaptive behavior&#039;&#039;&#039; or &#039;&#039;&#039;backward-looking expectations&#039;&#039;&#039; refers to a phenomenon where people&#039;s expectations or projections of...&#039;</p> <p><b>New page</b></p><div>==Definition==<br /> <br /> &#039;&#039;&#039;Adaptive expectations&#039;&#039;&#039; or &#039;&#039;&#039;adaptive behavior&#039;&#039;&#039; or &#039;&#039;&#039;backward-looking expectations&#039;&#039;&#039; refers to a phenomenon where people&#039;s expectations or projections of the future are unduly influenced by recent trends, and are thus liable to deviate &#039;&#039;systemically&#039;&#039; from [[rational expectations]] and [[rational behavior]]. The contrast is thus between adaptive expectations, that are backward-looking, and rational expectations, that are forward-looking.<br /> <br /> Note that adaptive behavior is not &#039;&#039;diametrically opposite&#039;&#039; to rational behavior, and in a slow-changing economy, adaptive behavior may be good enough for most purposes. However, if people are adaptive rather than rational, it is possible for governments to exploit this through policies that would not be possible if people were rational.<br /> <br /> ==Examples==<br /> <br /> ===Adaptive expectations about prices===<br /> <br /> People with adaptive expectations might believe that if the price of a commodity has been rising in the recent past, it will continue to rise in the future, despite the fact that the price is merely converging towards an equilibrium.<br /> <br /> ===Adaptive expectations about taxes===<br /> <br /> People with adaptive expectations about taxes might believe that a reduction in the current tax rate implies low tax rates in the future, thus increasing their marginal propensity to spend and reducing their need for saving. The [[rational behavior]] might well lead to the opposite conclusion: low tax rates today, combined with higher spending, means greater government debt that the government will try to alleviate by raising taxes in the future.</div> Vipul