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Expectations play a crucial role in finance, macroeconomics, monetary economics, and fiscal policy. In the last decade a rapidly increasing number of laboratory experiments have been performed to study individual expectation formation, the interactions of individual forecasting rules, and the aggregate macro behavior they co-create. The aim of this article is to provide a comprehensive literature survey on laboratory experiments on expectations in macroeconomics and finance. In particular, we discuss the extent to which expectations are rational or may be described by simple forecasting heuristics, at the individual as well as the aggregate level.

This chapter uses the theory of complex systems as a conceptual lens through which to compare the work of Friedrich Hayek with that of Vincent and Elinor Ostrom. It is well known that, from the 1950s onwards, Hayek conceptualised the market as a complex adaptive system. It is argued in this chapter that, while the Ostroms began explicitly to describe polycentric systems as a class of complex adaptive system from the mid-to-late 1990s onwards, they had in fact developed an account of polycentricity as displaying most if not all of the hallmarks of organised complexity long before that time. The Ostromian and Hayekian approaches can thus be seen to share a good deal in common, with both portraying important aspects of society – the market economy in the case of Hayek, and public economies, legal and political systems, and environment resources in the case of the Ostroms – as complex rather than simple systems. Aside from helping to bring out this aspect of the Ostroms’ work, using the theory of complex systems as a framework for comparing the Hayekian and Ostromian approaches serves two other purposes. First, it can be used to show how one widely criticised aspect of Hayek’s theory of society as a complex system, namely his account of cultural evolution via group selection, can be strengthened by an appeal to the work of Elinor Ostrom. Second, it also helps to resolve a tension – ultimately acknowledged by the Ostroms themselves – between some of their explicit methodological pronouncements and the actual, substantive approach they adopted in their analysis of polycentric systems.

We test the determinacy properties of the standard and financial-sector-augmented Taylor rules in a new Keynesian model with a presence of banking activities. We extend the basic fully rational environment to the setting with heterogeneous expectations. We observe that the benefits from extra financial targeting are limited. Financial targeting, if well designed, can compensate for the improper output-gap targeting through the financial-production channel. The analysis demonstrates however possible threats resulting from the misspecification of the augmented rule. A determinate mix of output-gap and inflation weights can turn indeterminate if compensated by too extreme financial targeting. The results are robust to the presence of heterogeneous expectations.

Tier 2 intervention is defined by the application of brief, efficient, and accessible supports for students who are at risk for social-emotional and behavioral concerns. Historically, Tier 2 interventions have been delivered in accordance with a standard protocol, with each student receiving the same general strategy in an undifferentiated manner. Yet, research has suggested the potential value of an adaptive Tier 2 approach, wherein brief assessments are conducted to determine which intervention (or adapted version of one particular intervention) is best suited to a student's individual needs. Within this chapter, we provide an overview of procedures related to adaptive Tier 2 intervention and discuss different approaches one might take to this practice. We conclude with a discussion of directions for future research in this area if adaptive Tier 2 intervention is to be widely adopted, implemented, and sustained within schools.

Organizations today operate in highly dynamic environments and are becoming more complex. Helping their organizations master this complexity is a major leadership challenge. To better understand how managers’ behaviors aggravate or reduce complexity, we reviewed 1,400 responses to a proprietary organizational complexity survey. Analysis identified specific managers’ behaviors that contribute to perceived complexity. We draw from these findings, literature on complex adaptive systems, and our consulting experiences to identify specific strategies managers can use to make it simpler for people to get things done, and even to “master” complexity by turning it into a source of strategic advantage.

Purpose – To show that The Sensory Order is an original effort to support, on a neurophysiologic basis, methodological individualism.

Methodology/approach – Considering that the mind is a complex and self-organized order, Hayek criticizes methodological holism according to which the cause of action has to be sought outside the individual, in macro-laws governing social wholes. He argues that, due to the nature of the mind, the cause of action has to be sought inside the individual.

Findings – The paper stresses that scholars have more or less neglected a very important point in discussions of the Austrian author's psychology. Hayek's psychology supports the idea that the explanation of the action stems from the understanding of its meaning.

Research limitations/implications – The article only discusses some of the epistemological consequences of Hayek's theory of the mind. For instance, it does not analyze in a detailed way the relationship between this theory and the idea of distributed knowledge. It left an in-depth examination of this issue for subsequent research.

Originality/value of paper – Many authors state that Hayek's version of methodological individualism only examines the non-intentional effects of action, neglecting the importance of Verstehen. They argue that the Austrian scholar is not a complete and coherent champion of methodological individualism. The paper shows that this criticism is unfounded.

Behavioral economics poses a challenge for the welfare evaluation of choices, particularly those that involve risk. It demands that we recognize that the descriptive account of behavior toward those choices might not be the ones we were all taught, and still teach, and that subjective risk perceptions might not accord with expert assessments of probabilities. In addition to these challenges, we are faced with the need to jettison naive notions of revealed preferences, according to which every choice by a subject expresses her objective function, as behavioral evidence forces us to confront pervasive inconsistencies and noise in a typical individual’s choice data. A principled account of errant choice must be built into models used for identification and estimation. These challenges demand close attention to the methodological claims often used to justify policy interventions. They also require, we argue, closer attention by economists to relevant contributions from cognitive science. We propose that a quantitative application of the “intentional stance” of Dennett provides a coherent, attractive and general approach to behavioral welfare economics.