Roger Guesnerie: What Can Economists Know? 3/5

The video discusses modern economic theory, highlighting its role in financial crises and critiquing its optimistic view of financial markets. It examines the rationality hypothesis and expectational coordination, offering internal and external criticisms. The methodological discussion emphasizes the importance of mathematical tools and the challenges of balkanization in economics. The conclusion calls for a reevaluation of rational expectations and encourages exploration of diverse beliefs.

What is one of the main criticisms of modern economic theory as discussed in the video?

• It relies too heavily on empirical data.

• It is too pessimistic about financial markets.

• It provides an overly optimistic view of financial markets.

• It ignores the role of government regulation.

How does behavioral economics address the criticisms of the rationality hypothesis?

• By incorporating psychological insights into economic behavior.

• By focusing solely on macroeconomic trends.

• By eliminating the use of mathematical tools.

• By simplifying economic models.

What is the rational expectation hypothesis primarily concerned with?

• The impact of historical data on future predictions.

• The role of government in economic stability.

• The coordination of expectations among economic agents.

• The unpredictability of economic agents.

What is a potential downside of the rational expectation hypothesis according to the video?

• It is too flexible and adaptable.

• It assumes all agents have perfect information.

• It leads to overly pessimistic economic forecasts.

• It disregards the role of speculation.

What is one reason for the popularity of the rational expectation hypothesis?

• It is based on empirical data.

• It simplifies economic modeling.

• It eliminates the need for behavioral insights.

• It is universally accepted by all economists.

What is one example of the consequences of reconsidering the rational expectation hypothesis?

• A decrease in economic modeling complexity.

• Speculation leading to less robust equilibria.

• Increased stability in financial markets.

• A rise in government intervention.

What does the term 'balkanization' refer to in the context of economic theory?

• The integration of economics with other social sciences.

• The dominance of one economic theory over others.

• The unification of different economic schools of thought.

• The fragmentation and specialization within the field of economics.

Why is the use of mathematical tools in economics considered controversial?

• They simplify complex economic phenomena.

• They are universally accepted without criticism.

• They eliminate the need for empirical data.

• They increase the entry cost for engaging in economic discussions.

How does the video suggest addressing the balkanization of economic theory?

• By eliminating all forms of economic modeling.

• By improving interaction between empirical knowledge and theoretical investigation.

• By focusing solely on mathematical modeling.

• By adopting a single economic theory.

What role does the video attribute to mathematical language in economics?

• It complicates economic discussions unnecessarily.

• It is only useful for statistical analysis.

• It helps fight geographical and ideological balkanization.

• It is irrelevant to modern economic theory.