In economics, the theory of rational inattention deals with the effects of the cost of information acquisition on decision making. For example, when the information required for a decision is costly to acquire, the decision makers may rationally take decisions based on incomplete information, rather than incurring the cost to get the complete information. [1] [2]
Economics is the social science that studies the production, distribution, and consumption of goods and services.
Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the economic decisions of individuals and institutions and how those decisions vary from those implied by classical theory.
Rationality is the quality or state of being rational – that is, being based on or agreeable to reason. Rationality implies the conformity of one's beliefs with one's reasons to believe, and of one's actions with one's reasons for action. "Rationality" has different specialized meanings in philosophy, economics, sociology, psychology, evolutionary biology, game theory and political science.
Value of information is the amount a decision maker would be willing to pay for information prior to making a decision.
Herbert Alexander Simon was an American economist, political scientist and cognitive psychologist, whose primary research interest was decision-making within organizations and is best known for the theories of "bounded rationality" and "satisficing". He received the Nobel Prize in Economics in 1978 and the Turing Award in 1975. His research was noted for its interdisciplinary nature and spanned across the fields of cognitive science, computer science, public administration, management, and political science. He was at Carnegie Mellon University for most of his career, from 1949 to 2001.
Microeconomics is a branch of economics that studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.
In economics, "rational expectations" are model-consistent expectations, in that agents inside the model are assumed to "know the model" and on average take the model's predictions as valid. Rational expectations ensure internal consistency in models involving uncertainty. To obtain consistency within a model, the predictions of future values of economically relevant variables from the model are assumed to be the same as that of the decision-makers in the model, given their information set, the nature of the random processes involved, and model structure. The rational expectations assumption is used especially in many contemporary macroeconomic models.
Bounded rationality is the idea that rationality is limited when individuals make decisions: by the tractability of the decision problem, the cognitive limitations of the mind, and the time available to make the decision. Decision-makers, in this view, act as satisficers, seeking a satisfactory solution rather than an optimal one.
New Keynesian economics is a school of contemporary macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of new classical macroeconomics.
Robert Emerson Lucas Jr. is an American economist at the University of Chicago, where he is currently the John Dewey Distinguished Service Professor Emeritus in Economics and the College. Widely regarded as the central figure in the development of the new classical approach to macroeconomics, he received the Nobel Prize in Economics in 1995 "for having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy". He has been characterized by N. Gregory Mankiw as "the most influential macroeconomist of the last quarter of the 20th century."
In economics and business decision-making, a sunk cost is a cost that has already been incurred and cannot be recovered.
Monetary economics is the branch of economics that studies the different competing theories of money. It provides a framework for analyzing money and considers its functions, such as medium of exchange, store of value and unit of account. It considers how money, for example fiat currency, can gain acceptance purely because of its convenience as a public good. It examines the effects of monetary systems, including regulation of money and associated financial institutions and international aspects.
Monetary policy is the process by which the monetary authority of a country, typically the central bank or currency board, controls either the cost of very short-term borrowing or the money supply, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.
John Brian Taylor is the Mary and Robert Raymond Professor of Economics at Stanford University, and the George P. Shultz Senior Fellow in Economics at Stanford University's Hoover Institution.
Thomas John "Tom" Sargent is an American economist, who is currently the W.R. Berkley Professor of Economics and Business at New York University. He specializes in the fields of macroeconomics, monetary economics and time series econometrics. As of 2014, he ranks fourteenth among the most cited economists in the world. He was awarded the Nobel Memorial Prize in Economics in 2011 together with Christopher A. Sims for their "empirical research on cause and effect in the macroeconomy".
Heterodoxy is a term that may be used in contrast with orthodoxy in schools of economic thought or methodologies, that may be beyond neoclassical economics. Heterodoxy is an umbrella term that can cover various schools of thought or theories. These might for example include institutional, evolutionary, Georgist, Austrian, feminist, social, post-Keynesian ,, ecological, Marxian, socialist and anarchist economics, among others.
Jacob Marschak was a Ukrainian-American economist, known as "the Father of Econometrics".
Christopher Albert "Chris" Sims is an American econometrician and macroeconomist. He is currently the John J.F. Sherrerd ’52 University Professor of Economics at Princeton University. Together with Thomas Sargent, he won the Nobel Memorial Prize in Economic Sciences in 2011. The award cited their "empirical research on cause and effect in the macroeconomy".
Phillip David Cagan was an American scholar and author. He was Professor of Economics Emeritus at Columbia University.
The following outline is provided as an overview of and topical guide to economics:
Neil Wallace is an American economist and professor at Pennsylvania State University. Wallace is considered one of the main proponents of new classical macroeconomics.
In economics and other social sciences, preference is the ordering of alternatives based on their relative utility, a process which results in an optimal "choice". The character of the individual preferences is determined purely by taste factors, independent of considerations of prices, income, or availability of goods. In addition to this, agents are expected to act in their best interest.
This glossary of economics is a list of definitions of terms and concepts used in economics, its sub-disciplines, and related fields.