ABSTRACT
Before continuing it may be useful to approach this from a slightly different angle. Plans are based, to a greater or lesser extent, on expectations (knowledge type 3). Expectations are, of course, widely believed to influence actions, and the essential difference between theories is often to be found in the different way in which expectations are treated. While the rational expectations (RE) approach implicitly assumes that everyone has the same expectations, at the other extreme Lachmann emphasizes the dire consequences of expectations that necessarily diverge. But we may now pause to ask: expectations of what? RE approaches relate primarily to prices (or prices indexes)— they refer to individuals’ expectations of prices. Lachmann is less specific except to say that they are bound to be disappointed, from which we should infer that he is referring to expectations of the things about which individuals differ. Realizing that expectations, like the plans in which they are embodied, are multidimensional makes us realize that the expectations concerning the vast majority of things (events) about which we have expectations will be fulfilled. We may thus question whether Lachmann’s statement that “experience teaches us that in an uncertain world different men hold different expectations about the same future event” is universally true and realize that it depends crucially on the type of event in question. For a large number of events there is widespread agreement of expectations.
