Behavior Quote by Kenneth Arrow
“When you look at any experimental work not directly related to economics, but trying to test rational behavior in other ways, experiments have conspicuously failed to show rational behavior. Macro evidence certainly suggests deviations from rationality, but I don't want to say the rationality hypothesis is completely wrong. If you have any introspective idea or experimental idea about people's behavior, it seems to be incompatible with the really full scale rational expectations.”
About This Quote
Source Paper: Essays in the Theory of Economic Growth, 1972
Empirical studies outside economics often do not confirm rational behavior, yet macro trends hint at deviations, suggesting the rational expectations model is incomplete but not wholly false.
In simple terms: Experiments rarely show full rationality, but overall patterns still support it partially.
Key Takeaway
Recognize limits of rational models; seek broader evidence.
Themes
economics
behavioral science
theory
methodology
Mood
critical
inquisitive
Type
analytical
theoretical
When to use this quote
- policy analysis
- market forecasting
- behavioral research
- educational curricula
Key Concepts
rational expectations
empirical testing
model limitations
Questions to Reflect On
- How can models incorporate observed irrationalities?
- What experimental designs could better test rationality?
A Different Perspective
Rational expectations may not capture all human behavior nuances.
