The paper contrasts theories that explain diverse belief by asymmetric private information (PI) with theories which postulate agents use subjective heterogenous beliefs (HB). We focus on problems where agents forecast aggregates such as profit rate of the S&P500 and our model is similar to the...

Today’s demand for social insurance is supported by economic reasoning showing that private insurance markets do not provide efficient coverage for medical insurance, for inter-generational risk sharing and for income instability. It is unfashionable to say but government intervention in these...

We explore a New Keynesian Model with diverse beliefs and study the aggregation problems in the log-linearized economy. We show the solution of these problems depend upon the belief structure. Agents' beliefs are described by individual state variables and satisfy three Rationality Axioms,...

We show the dynamics of diverse beliefs is the primary propagation mechanism of volatility in asset markets. Hence, we treat the characteristics of the market beliefs as a primary, primitive, explanation of market volatility. We study an economy with stock and riskless bond markets and formulate...