This collection of essays uses the lens of rational expectations theory
to examine how governments anticipate and plan for inflation, and
provides insight into the pioneering research for which Thomas Sargent
was awarded the 2011 Nobel Prize in economics. Rational expectations
theory is based on the simple premise that people will use all the
information available to them in making economic decisions, yet applying
the theory to macroeconomics and econometrics is technically demanding.
Here, Sargent engages with practical problems in economics in a less
formal, noneconometric way, demonstrating how rational expectations can
satisfactorily interpret a range of historical and contemporary events.
He focuses on periods of actual or threatened depreciation in the value
of a nation's currency. Drawing on historical attempts to counter
inflation, from the French Revolution and the aftermath of World War I
to the economic policies of Margaret Thatcher and Ronald Reagan, Sargent
finds
that there is no purely monetary cure for inflation; rather, monetary
and fiscal policies must be coordinated. This fully expanded edition of
Rational Expectations and Inflation includes Sargent's 2011 Nobel
lecture, "United States Then, Europe Now." It also features new articles
on the macroeconomics of the French Revolution and government budget
deficits.
