*noun*; a method of representing the economy as the sum of many identical individuals and firms, each represented by a system of mathematical equations. The Rational Expectations Hypothesis (REH) takes its name from the premise that economic actors, i.e., everyone, do not make consistent errors about the present or future behavior of markets.
REH was devised mainly as a rebuke to Keynesian economics, and in particular, the strategy of fiscal policy or monetary policy.
According to the REH, fiscal policy does not alter aggregate demand because the "average" person recognizes that her lifetime income is not increasing--so she needs to save rather than spend the stimulus money, in anticipation of higher taxes in the future.
At the same time, monetary policy does not work because it relies on lowering interest rates to make more money available; more money means inflation, but people have to be deceived into thinking prices for their product are going up, so they will expand production. According to REH, people or firms will figure this out, and see increased demand as mere inflation. Instead of increasing output and employment, they'll want to raise prices so they can meet their future bills.
According to REH, both monetary and fiscal policy rely on illusions to work; and since people (on average) will make rational estimates o the future, they will defeat these illusions.
REH was devised mainly as a rebuke to Keynesian economics, and in particular, the strategy of fiscal policy or monetary policy.
According to the REH, fiscal policy does not alter aggregate demand because the "average" person recognizes that her lifetime income is not increasing--so she needs to save rather than spend the stimulus money, in anticipation of higher taxes in the future.
At the same time, monetary policy does not work because it relies on lowering interest rates to make more money available; more money means inflation, but people have to be deceived into thinking prices for their product are going up, so they will expand production. According to REH, people or firms will figure this out, and see increased demand as mere inflation. Instead of increasing output and employment, they'll want to raise prices so they can meet their future bills.
According to REH, both monetary and fiscal policy rely on illusions to work; and since people (on average) will make rational estimates o the future, they will defeat these illusions.
The rational expectations hypothesis states that we can break the realization of a return into an expected return that depends on the current information set and an unexpected component that depends only on new information.
by Abu Yahya March 3, 2009
Get the rational expectations hypothesis mug.n. An individual who, in a professional capacity, creates a system or theory in order to account for something that is not understood. A person who poses a Hypothesis, which is a tentative insight into the natural world; a concept that is not yet verified but that if true would explain certain facts or phenomena.
Latin, subject for a speech, from Greek hupothesis, proposal, supposition, from hupotithenai, hupothe-, to suppose : hupo-, hypo- + tithenai, to place; Indo-European roots.
Latin, subject for a speech, from Greek hupothesis, proposal, supposition, from hupotithenai, hupothe-, to suppose : hupo-, hypo- + tithenai, to place; Indo-European roots.
by Zafaryab September 13, 2011
Get the Hypothesist mug.An educated guess. Yup, it's that simple. No need to spend hours trying to find someone who understands the Wikipedia shit! 😂
Girl #1: ugh! I have this stupid lab report due tomorrow and I don't know what a hypothesis is!! I'm gonna go search it on Wikipedia.
Girl #2: No, no! Don't, you'll waste your time. Just go on urban dictionary😜
Girl #2: No, no! Don't, you'll waste your time. Just go on urban dictionary😜
by Dude frickin bro April 14, 2016
Get the Hypothesis mug.Haselton, M. G. & Buss, D. M. (2001). Emotional reactions following first-time sexual intercourse: The affective shift hypothesis. Personal Relationships, 8, 357-369.
Abstract: This article develops the Affective Shift Hypothesis, which suggests that women experience positive affective shifts following first-time intercourse as a means to facilitate a longer-term, more committed relationship. The hypothesis predicts a negative affective shift in men who pursue a short-term mating strategy; this shift is hypothesized to function to curtail commitment by motivating the man to terminate the relationship.
Abstract: This article develops the Affective Shift Hypothesis, which suggests that women experience positive affective shifts following first-time intercourse as a means to facilitate a longer-term, more committed relationship. The hypothesis predicts a negative affective shift in men who pursue a short-term mating strategy; this shift is hypothesized to function to curtail commitment by motivating the man to terminate the relationship.
177 Ss in Study 1 documented sex differences predicted by the affective shift hypothesis. 203 Ss in Study 2, using a somewhat different methodology involving reports of presex and postsex feelings, found that men with high numbers of sex partners, but not men with low numbers of partners, experienced a decrease in their partner's physical and sexual attractiveness following first-time sexual intercourse. In contrast, women, more than men, experienced increases in feelings of love and commitment following first-time sex.
by Jake January 16, 2004
Get the affective shift hypothesis mug.A hypothesis proposed by C.P.and A.P., which stipulates that the incidence of irrelevant comments increases proportionally to the duration of existence of a group chat conversation originally formed with a single, focused purpose.
Our group chat regarding grass-root political organizing in Cyprus has deteriorated into relentless shitposting about petty politics and vegan recipes, confirming our shitposting hypothesis.
by piklachou September 9, 2021
Get the shitposting hypothesis mug.Without question, THE most important unsolved problem in all of mathematics. The hypothesis, put forth by Bernhard Riemann in 1859, states that ALL non-trivial zeros of the Zeta function have a real part of one-half. Another way to put this is that the distribution of numbers with an odd number of prime factors vs. those with and even number of prime factors is roughly 50/50. Anyone who can prove the Riemann Hypothesis without the aid of a computer will win a $1,000,000 prize. A great deal of mathematical theorems rest on the assumption that this hypothesis is true. If anyone can find a non-trivial zero of Zeta with a real part not equal to 1/2 will destroy a lot of mathematical work, and become very famous.
The Zeta function = 1 + 1/2^S + 1/3^S + 1/4^S .... to infinity. The Riemann Hypothesis states that Zeta = 0 only when the real part of S = 1/2 (non-trivial zeros on the critical line). Has eluded a proof for almost 150 years.
by Ignatz April 28, 2008
Get the Riemann Hypothesis mug.A behavioural anomally known to exist in Costa Rica. When a human is sober, they can touch the local dogs with ease, while crabs will run away as fast as they can. When the same human is under the influence of alcohol, dogs run away almost instantly while the human can reach down and touch crabs with ease.
I tried touching the crabs on the beach, but it didn't work until I was drunk because of the Crab-Dog-Alcohol Hyphothesis.
by Klotz November 4, 2003
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