ABSTRACT
History can be thought of as society•s memory. If it is fuzzy or inaccurate we may be condemned to relive it. There does seem to be a danger that the application of some recent developments in economics, such as extreme versions of the rational expectations approach, are in danger of depriving us of manias, panics, crashes, and even modest booms and slumps. This may not be helpful in terms of society•s memory. But perhaps a certain amount of this is a matter of semantics or of emphasis. Those who argue that it is rational to buy when prices are rising if the expectation is that prices will keep rising sound entirely reasonable. Those who say it is folly are surely simply shifting the emphasis to the fact that we do not know when the terminal condition, that is the change in fashion or whatever, will come. To describe all of these episodes as rational surely stretches the de“nition of rationality to an unhelpful extent.
