Uncertainty, expectations, and financial instability : reviving Allais's lost theory of psychological time

Eric Bartholon

Eric Barthalon applies the neglected theory of psychological time and memory decay of Nobel Prize winning economist Maurice Allais (1911 2010) to model investors' psychology in the present context of recurrent financial crises. Shaped by the behavior of the demand for money during episodes of hyperinflation, Allais's theory proves economic agents perceive the flow of clocks' time and forget the past at a context-dependent pace: rapidly in the presence of persistent and accelerating inflation and slowly in the event of the opposite situation. Barthalon recasts Allais's work as a general theory.

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Year of publication:	2014
Authors:	Barthalon, Eric
Publisher:	New York, NY : Columbia Univ. Press
Subject:	Anlageverhalten \| Behavioural finance \| Entscheidung unter Unsicherheit \| Decision under uncertainty \| Finanzkrise \| Financial crisis \| Rationale Erwartung \| Rational expectations \| Verhaltensökonomik \| Behavioral economics \| Kreditmarkt \| Instabilität \| Erwartung

Extent:	XLVI, 396 S. graph. Darst.
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Glossar enthalten ; Glossary included
Language:	English
Notes:	Table of Contents; List of Tables; List of Figures; Preface; Acknowledgments; Introduction; Glossary of Mathematical Symbols in Order of Appearance; Part 1. The Progressive Emergence of Expectations in Economic Theory; 1. Expectations Before the Rational Expectations Revolution; 2. Rational Expectations Are Endogenous to and Abide by ''the'' Model; Part 2. Allais''s Theory of ""Expectations"" Under Certainty; 3. Macrofoundations of Monetary Dynamics; 4. Microfoundations of Monetary Dynamics: The HRL Formulation of the Demand for Money; 5. The Fundamental Equation of Monetary Dynamics 6. Joint Testing of the HRL Formulation of the Demand for Money and of the Fundamental Equation of Monetary DynamicsPart 3. Transposing the HRL Formulation to Financial Markets: Preliminary Steps; 7. Allais's HRL Formulation: Illustration of Its Dynamic Properties by an Example of Hyperinflation (Zimbabwe 2000-2008); 8. The HRL Formulation and Nominal Interest Rates; Part 4. The HRL Formulation and Financial Instability; 9. Perceived Returns and the Modeling of Financial Behavior; 10. Downside Potential Under Risk: The Allais Paradox and Its Conflicting Interpretations 11. Downside Potential Under Uncertainty: The Perceived Risk of Loss12. Conclusion; Appendix A: How to Compute Zn and zn; Appendix B: Nominal Interest Rates and the Perceived Rate of Nominal Growth; Appendix C: Proofs; Appendix D: Comparison Between the Kalman Filter and Allais''s HRL Algorithm; Appendix E: A Note on the Theory of Intertemporal Choice; Appendix F: Allais's Cardinal Utility Function; Notes; Bibliography; Index
ISBN:	978-0-231-16628-7 ; 978-0-231-53830-5
Source:	ECONIS - Online Catalogue of the ZBW

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