property – свойство, качество
reconcile – примирять
relevant – соответствующий, соотносимый
scarcity – недостаток
signal – сигнал
substitute – заменять, подменять
tend – стремиться, следовать тенденции, устанавливать тенденцию
utility – полезность, практичность, выгодность
value theory – теория стоимости
two-fold – двусторонний
came to be called – стал называться
Marginal Revolution – Маржиналистская Революция (маржинализм – теория предельной полезности и производительности)
extra unit – дополнительная единица (продукции)
give up – оставлять, бросать
take into consideration – принимать во внимание
economic agents – участники экономической жизни, экономических процессов
in this context – в данном контексте
bid up – набавлять цену
oust out – вытеснять
buy order – заказ на продажу
sell order – заказ на покупку
Exercise 9
Answer the questions:
1. What view did the economists in the XIXth century accept?
2. What did the value of a product depend on, in accord with the classical value theory?
3. How were products distributed, according to this theory?
4. Whose ideas did the classical theory have roots in?
5. Why didn't the classical theory work in practice?
6. What theories were the classical theories substituted by?
7. What is value, in the neoclassical view?
8. Where do buyers and sellers make their choices, according to the neoclassical view?
9. What is «utility», in the neoclassical sense of the word?
10. Who do neoclassical theories take into consideration?
Rational Expectations Theory
The theory of rational expectations is based on the assumption that in many economic situations the outcome depends partly upon what people expect to happen. The value of a currency, for example, depends to a great extent on what people expect that currency's rate of depreciation to be. That is because people hurry to give up a currency that they expect to lose value, thereby contributing to its depreciation. In the same way, the price of shares depends partly on what the shares' buyers and sellers believe it to be in the future.
The relation between expectations and outcomes is two-fold. In forming their expectations, people try to forecast what will actually occur, and the results of their forecasting, provided that they were correct, help them form expectations for the future outcomes. There is continual feedback from past outcomes to current expectations, as in recurrent situations the way the future unfolds from the past tends to be stable, and people adjust their forecasts to conform to this stable pattern.
The theory of rational expectations states that outcomes do not differ regularly from what people expected them to be. Of course, sometimes people make forecasting errors, but those errors will not persistently occur. The rational expectation theory thus provides a trustworthy basis for some economic theories which have evident political implications. Those are the «random walk» or «efficient markets» theory of securities prices, the theory of the dynamics of hyperinflations, the «permanent income» and «life-cycle» theories of consumption, the theory of «tax smoothing,» and the design of economic stabilization policies.
Traditionally economists believed that there was a positive relationship between people's consumption and their current income. The rational expectation theory debates this issue stating that people consume out of their «permanent income,» which can be defined as the level of consumption that can be sustained while leaving wealth intact. This has changed the way economists think about short-term stabilization policies, such as temporary tax cuts, designed to stimulate the economy. Formerly economists believed that tax cuts would increase disposable income, thus causing people to consume more. Now, in accord with the permanent income model, it is believed that temporary tax cuts have little effect on consumption because people are relating their consumption decision to their wealth, not their current disposable income.
conform – согласовывать(ся), приспосабливать(ся)
continual – продолжающийся, постоянный
contribute – прибавлять, доставлять, привносить
current – текущий, современный
disposable – имеющийся в наличии
dynamics – динамика
error – ошибка
evident – очевидный
expect – ожидать
expectation – ожидание
feedback – обратная связь
formerly – раньше, изначально
happen – случаться
hurry – спешить
hyperinflation – гиперинфляция
intact – нетронутый
occur – случаться, происходить
outcome – результат, исход
partly – частично
persistently – настойчиво, постоянно
positive