Rational Expectations Has No Foundation in Any Coherent, Existing Theory of Probability

20 Pages Posted: 23 Oct 2018

See all articles by Michael Emmett Brady

Michael Emmett Brady

California State University, Dominguez Hills

Date Written: September 29, 2018

Abstract

The theory of rational expectations has no foundation in any extant theory of probability. None of the five existing theories of probability (Logical, Subjective, Classical, Propensity, and Limiting (relative) Frequency) lend any support at all to the Muthian conjecture that the subjective probability distributions are distributed about an objective, true probability distribution. This statement is incoherent and incomprehensible because in all subjective theories of probability there are no objective theories of probability, while in all objective theories of probability there are no subjective probability distributions.

Keywords: Muth.Savage, De Finetti, Reichenbach, Rational Expectations, SEU, Subjective Probability, Objective Probability

JEL Classification: B10, B12, B14, B16, B20, B22

Suggested Citation

Brady, Michael Emmett, Rational Expectations Has No Foundation in Any Coherent, Existing Theory of Probability (September 29, 2018). Available at SSRN: https://ssrn.com/abstract=3257245 or http://dx.doi.org/10.2139/ssrn.3257245

Michael Emmett Brady (Contact Author)

California State University, Dominguez Hills ( email )

1000 E. Victoria Street, Carson, CA
Carson, CA 90747
United States

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