ABSTRACT
Rational expectations (Sargent, 1987) confuses stationary markets with efficient markets. We will explain why efficient markets and equilibrium markets are mutually contradictory, why if you have “efficiency” then you cannot have equilibrium (McCauley, 2009). An efficient market admits no equilibrium, so it exhibits no stationary price. In stark contrast, a stationary market would necessarily fluctuate about an equilibrium price, a stationary price. Rational expectations includes contradictory ideas because equilibrium is contradictorily defined in economics (McCauley, 2009). Strange as it seems, assumptions of equilibrium in economics are marked by lack of attention to the precise definition of equilibrium in dynamical systems theory, physics, and the theory of stochastic processes. There's an historic reason for this.
