ABSTRACT
The theme of expectations formation is also taken up by Wren-Lewis, who focuses on @GOL@=HJG;=KKG>=PH=;L9LAGFK>GJE9LAGF@9K:==FLJ=9L=<AFHJ9;LA;=AFKH=;Ad;EG<=DK of the UK economy. Wren-Lewis considers the responses of builders of large-scale ‘Keynesian’ models to the ‘challenge’ of the Rational Expectations Hypothesis (REH) and argues that the REH and the theoretical underpinnings of Keynesian models are not necessarily incompatible. In doing so the author is implicitly adopting a particular view of REH which emphasises only that expectations should be consistent with the underlying macro-economic model in question. However, like Hodgson, Wren-Lewis emphasises the importance of divergent expectations on the part of economic agents and thus would appear to cast doubt on the merits of assuming such consistency.
