Why Our Beliefs Don’t Predict Much About the Economy

The more we learn about how people really think, the more we must rethink economic theory. Changes in fundamental beliefs play a major role in the fluctuations of the economy. That’s the implication of two fascinating new studies that show how people systematically change their beliefs in thinking about the financial future. At the moment, the knowledge that economists have accumulated about this subject suggests that we should have a high degree of humility — not only in forecasting where we are going, but in describing where we have been. ….[READ]