Bounded Rationality in Macroeconomics The Arne Ryde Memorial Lectures [Paperback]

How do people behave in new situations in which previous experience is not useful? The recent changes in Eastern Europe, for example, are unprecedented and there is not an available model on which to base the mechanisms that will govern the economics in this region. The concept of bounded (or limited) rationality is being developed to analyze behavior in such situations. In this book Thomas Sargent describes and interprets the recent work in the area, especially in statistics, econometrics, networks and artificial intelligence. He focuses on examples designed to illustrate the issues involved and the kinds of questions that are being asked and answered in this research. He points to further potential positive developments of the theory as well as some of its limitations.

The presentation is lucid and concise. Most macroeconomist readers will find the chapter on neural networks, genetic algorithms, and artificial intelligence particularly instructive...Those willing to join the search will find no better technical introduction than Sargent's book. --Journal ofEconomic Literature