This paper shows that heterogeneity of expectations matters. The individual differences studied concern the assessment of the input-output relationship. Output clearly declines with rising expectations errors. This occurs even - and strongly - when there are equal numbers of over- and...

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This paper describes results from a new experiment studying determinants and effects of economic risk-taking. In each session four subjects choose three slots for ice fishing on their portion of a frozen lake. The farther out on the lake the higher are the returns but also the higher is the risk...

We investigate the circumstances in which business cycle forecasting is beneficial for business by addressing both the short-run and the long-run aspects. For an assessment of short-run forecasting we make a distinction between using publicly available information of cycle probabilities and the...

This chapter traces theoretical developments on the consumption/saving function since Irving Fisher and John Maynard Keynes and reviews relevant contributions from the field of behavioral economics. We then propose a model of consumption where an atemporal utility function involving current...

This study takes up Keynes' ideas concerning long-term expectations, particularly his notion that expectations are subject to sudden changes with strong effects on economic activity. We start by detailing Keynes' views regarding the nature of expectations and their role in the business cycle. I...

Business cycles have historically been an important topic for behaviorally orientedeconomists. The concept of an economic and financial cycle based on interlocking mechanismsleading from the recession to the boom was developed in the 18th and 19th century. The earlybehavioral economics of the...

This note discusses a range of cases where the proposition that one plus one is more or less than two makes sense. Simple examples from the natural world indicate that interaction (reproduction and predator-prey interaction) between addable units can change their sum. A case drawn from commerce...

For the development of banking the 1920s are important because in that historical period a set of new practices influenced banks' lending policies that strongly favored credit expansion. Those innovations pertained to the measurement of credit risk and to new sales methods for banks. In...