an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

labor unions and the adoption of new technology the paper examines whether unionization by workers discourages the adoption of labor saving techniques this is done in the context of an oligopolistic industry with a small number of firms some of which are unionized we find that unionization can actually encourage the adoption of labor saving technology provided that the technological improvement is mild and that demand is sufficiently high or demand elasticity sufficiently low if there is an effective threat of entry that causes the union to moderate its wage demands then unionization may encourage the adoption of new technology even at low levels of demand

sustainability at home policy measures for energy efficient appliances abstract residential energy consumption is now an important component of total energy consumption and its related emissions in addition this consumption has significant potential for growth in both developed and developing countries as average incomes increase and domestic appliance numbers rise reduction in this energy use may be achieved both through conservation measures and through increased efficiency in its use this paper focuses on energy efficiency in appliances those many devices through which household energy is consumed the policy instruments available to promote the uptake of more efficient devices and issues associated with their use are reviewed drawing on developed country experiences to date the instruments available are more limited than in other energy applications and largely comprise information dissemination forms of subsidy and regulation the last is commonly used in the form of minimum energy performance standards assessment of the three instrument types and issues with their use suggests that regulation is the most important measure albeit with several qualifications on the manner of its use

growth forecasts belief manipulation and capital markets abstract we analyze how a benevolent privately informed government agency would optimally release information about the economy s growth rate when the agents hold heterogeneous beliefs we model two types of agent conforming and dissenting the former has a prior that is identical to that of the government agency whereas the latter has a prior that differs from that of the government agency we identify both informative and uninformative equilibria informative equilibria are equilibria in which the government agency s equilibrium signal leads to a revision of beliefs we demonstrate that the uninformative equilibria can in fact dominate the informative ones in terms of ex post social welfare

long run relationship between output capital labour and productivity in emerging market economies long run relationship between the variables involved in the production function is an issue that is important particularly in developing countries as the neoclassical production function is best suited for developed countries and its applicability to developing countries is questionable in various ways this motivates us to do this based on time series analysis taking indian textile industry as an example which is currently at its crucial stage as a critical industry in an emerging economy with the phasing out of multi fibre arrangement in 2005 this study documents existence of cointegration between capital and output negative impact of employment shocks on output changes substitutability between changes in capital and labour negative effect of shocks to changes in capital stock on productivity and negative effect of employment shocks on future productivity these results are in line with the general perceptions about this industry and with the standard neoclassical propositions as explained in t

payments for pioneers revisiting the role of external rewards for sustainable innovation under heterogeneous motivations abstract acknowledging the diversity of preferences goals and motivations of individuals is key to promote the effectiveness of incentive based conservation interventions this paper analyses the heterogeneity of motivations to adopt silvopastoral practices a social ecological innovation for soil conservation and carbon emission reduction we use q methodology to identify smallholders views with regard to these practices in a community in the forest frontier in chiapas mexico the analysis uncovers three main perspectives self sufficient pioneers environmentally conscious followers and payment dependent conservatives we discuss these perspectives around three topics smallholders predisposition to adopt silvopastoral practices their views about needing external payments to sustain their livelihood and the diffusion of innovative sustainable practices we relate these perspectives with livelihood characteristics and with observed adoption levels under a pilot programme to promote silvopasture our findings suggest that incentives other than payments may be more appropriate for those more likely to adopt and that payments could encourage rent seeking strategies and not necessarily promote permanent behavioural change we suggest ways for designing more effective and adaptive environmental conservation programmes to foster adoption and continuation of social ecological innovations

technological expectations and adoption of improved technology abstract attention is focused upon the adoption demand rather than the creation supply of new technology which improves from time to time based on the expected flow of technological progress over which the firm demander has no control it must decide either to adopt the current best available technology or to postpone adoption the distinguishing features of the model are that more than one technological innovation is anticipated and expectations about the likelihood of such innovations are revised as time passes since the last innovation our analysis shows that the firm will adopt the current best practice if its technological lag exceeds a certain threshold moreover as time passes without new technological advances it may become profitable to purchase a technology that has been available even though it was not profitable to do so in the past

towards credibility from inflation targeting the brazilian experience this article analyses the use of the basic interest rate after the adoption of inflation targeting in brazil and the credibility of this monetary regime through two indices that consider the cukierman and meltzer 1986 definition for credibility it also shows the main theoretical and practical motives for changes in the conduction of the monetary policy in the 1970s the way that inflation targeting strategy is inserted in rules vs discretion analysis and the main points that characterize the literature concerning inflation targeting the findings denote that the strategy implemented in brazil is not a good mechanism to develop credibility

on the adoption of new technologies we investigate the incentives of private firms to adopt new technologies econometric investigation is performed on a pooled sample of individual us airline firms over the period 1971 to 1986 for which extensive information on available jet aircraft technology and fleet choice have been recorded given the incidence of successive commercial aircraft innovations and variation in production attributes across firms we are able to consider a wider array of time dependent and time independent adoption influences than in previous firm level studies to the extent that our study provides useful general insights into adoption decisions by firms the results have implications for us global competitiveness policy one key finding is that firms subject to increased product market competition exhibit a higher propensity to adopt technological innovations

information rigidity and the expectations formation process a simple framework and new facts we propose a new approach to test the full information rational expectations hypothesis which can identify whether rejections of the null arise from irrationality or limited information this approach quantifies the economic significance of departures from the null by quantifying the underlying degree of information rigidity applying this approach to u s and international data of professional forecasters and other agents yields pervasive evidence consistent with models of imperfect information furthermore the proposed approach sheds new light on policies such as inflation targeting and those leading to the great moderation affecting expectations finally we document evidence of state dependence in the expectations formation process

the determinants of technology adoption the case of the banking firm using data on the adoption of automatic teller machines by firms in the banking industry this study examines the relationship between the decision to adopt new technology and its determinants since banking firms differ considerably in terms of the competitive environments in which they operate focusing on this one innovation in this industry allows a stronger test of the relationship between market structure and the adoption of new technology than has been previously conducted using a failure time estimation procedure we find that larger banks and banks operating in more concentrated local banking markets register a higher conditional probability of adopting this new technology all else equal we also find that other results are consistent with the underlying model and that the bank s regulatory environment shapes its adoption decision in plausible ways

a quantitative comparison of sticky price and sticky information models of price setting i estimate sticky price and sticky information models of price setting for the united states via maximum likelihood techniques reaching several conclusions first the sticky price model fits best and captures inflation dynamics as well as reduced form equations once hybrid behavior is allowed second the importance of hybrid behavior in sticky price models is potentially consistent with a role for some information imperfections such as sticky information as a complement to nominal price rigidities finally the favorable results herein for the hybrid sticky price model when evaluated by statistics that summarize the relative fit of different models is consistent with the existing literature that is both supportive and dismissive of such models as this literature has largely ignored fit in evaluating such models many previous studies have focused on ancillary issues such as the standard errors associated with certain parameters or granger causality tests that may not provide much information about sticky price models

the evolution of u s airline competition studies by academic economists were a significant force in the movement towards deregulation of the domestic airline industry in the early 1970s levine 1965 jordan 1970 keeler 1972 douglas and miller 1974 during the critical 1977 78 period in which deregulation was imposed first de facto by the civil aeronautics board cab and then de jure by congress the chairman and vice chairman of the cab were economists for the 14 years since deregulation economists have continued intensive study of the industry in part because of the unusual availability of reliable firm and transaction level data and in part because of the rare opportunity to observe an industry as it evolves from strict economic regulation to fairly unimpeded competition and strategic behavior the simplest prediction of economists about airline deregulation and one of the few on which nearly all economists agreed was that deregulation would improve consumer welfare in comparison to continued price and entry regulation fourteen years later nearly all economists still agree on this though the degree of enthusiasm for the deregulation outcome varies considerably there was substantial disagreement among economists about the market structure that would result because studies of scale economies in the airline industry had concluded that none existed beyond the scale of the smaller major airlines of the 1970s caves 1962 eads et al 1969 many economists argued that deregulation would result in more than the 11 major airlines that existed at the time of deregulation others predicted that only a few or possibly only one airline would survive at a large scale two noted university of chicago economists sam peltzman and lester telser made a bet in 1979 on whether

adoption and diffusion of an innovation of uncertain profitability the argument has frequently been made that the pattern of diffusion associated with most new innovations will typically have certain characteristics a diffusion curve for an innovation is usually defined as the proportion of its potential users who have already adopted as a function of time measured from the first adoption many empirical studies by both economists and other social scientists have shown that diffusion curves nearly always have two distinct characteristics i they are s shaped the proportion adopted is an increasing function of time which is initially convex but eventually becomes concave and ii they tend to be right hand skewed the inflection point occurs at a time corresponding to a proportion adopted which is less than one half so that the function is concave over the greatest amount of time in fact this skewing is occasionally severe enough to make the diffusion curve appear concave everywhere the focus of most empirical studies of innovation diffusion has centered on identification of either the major determinants of the speed of diffusion or the characteristics of firms which determine how long they delay adoption the seminal contributions are griliches 6 study of hybrid corn and mansfield s 121 study of 12 industrial innovations these studies and most of the similar ones following conclude that diffusion is faster for innovations with higher profitability and that large firms tend to be the earliest adopters some studies e g mansfield 121 herregat 71 have attempted to ascertain

disagreement and biases in inflation expectations empirical work documents substantial disagreement in inflation expectations obtained from survey data furthermore the extent of such disagreement varies systematically over time in a way that reflects the level and variance of current inflation this paper oers a simple explanation for these facts based on asymmetries in the forecasters costs of over and under predicting inflation our model implies biased forecasts with positive serial correlation in forecast errors and a cross sectional dispersion that rises with the level and the variance of the inflation rate it also implies that forecast errors at dierent horizons can be predicted through the spread between the short and long term variance of inflation we find empirically that these patterns are present in inflation forecasts from the survey of professional forecasters a constant bias component not explained by asymmetric loss and rational expectations is required to explain the shift in the sign of the bias observed for a substantial portion of forecasters around 1982

the role of central bank transparency for guiding private sector forecasts central banks have become remarkably more transparent over the last few decades in this paper we study the effects of this evolution focusing on whether enhanced central bank transparency lowers dispersion among professional forecasters of key economic variables we use a large set of proxies for central bank transparency in 12 advanced economies we find evidence for a sizeable effect e g by announcing a quantified inflation objective or by publishing inflation and output forecasts however there are decreasing marginal effects to increases in transparency and the disagreement among the expectations of the general public is not affected this suggests that there are possible limits to transparency

striving to be green the adoption of total quality environmental management many firms are undertaking environment friendly organizational change by applying the philosophy of total quality management with its emphasis on reducing waste and increasing efficiency their objective is to improve their management of pollution and increase customer satisfaction this article investigates the factors that lead to total quality environmental management tqem by large firms we find that internal considerations stemming from a firm s technical capability size absolute and relative to competing firms extent of operations and volume of past emissions are strongly associated with the tqem adoption decision the first four factors are proxies for the firm s costs and capabilities of adopting tqem while the fifth factor is related to the benefits from increasing efficiency and waste reduction and thus proxies for internally generated demand for tqem the desire to improve a firm s image with customers earning good will with regulators and the anticipation of future regulations do not a

effects of transparency monetary policy signalling and clarity of central bank communication on disagreement about inflation expectations abstractthe literature on transparency and central bank communication and the literature on disagreement about expectations are evolving however both have been evolving separately despite the advances in the literature several key issues remain open and there are gaps to be filled therefore this study analyses the effects of monetary policy signalling and clarity of central bank communication on disagreement about inflation expectations it also investigates whether greater transparency coincides with lower levels of disagreement in inflation expectations in brazil the findings suggest that transparency is important to reduce disagreement about inflation expectations moreover our estimates indicate that central bank communication and clarity affect disagreement about inflation expectations in brazil

frictions or mental gaps what s behind the information we don t use and when do we care consumers suffer significant losses from not acting on available information these losses stem from frictions such as search costs switching costs and rational inattention as well as what we call mental gaps resulting from wrong priors worldviews or relevant features of a problem not being top of mind most research studying such losses does not empirically distinguish between these mechanisms instead we show that most highly cited papers in this area presume one mechanism underlies consumer choices and assume away other potential explanations or collapse many mechanisms together we discuss the empirical difficulties that arise in distinguishing between different mechanisms and some promising approaches for making progress in doing so we also assess when it is more or less important for researchers to distinguish between these mechanisms approaches that seek to identify true value from demand without specifying mechanisms behind this wedge are most useful when researchers are interested in evaluating allocation policies that strongly steer consumers towards better options with regulation traditional policy instruments and defaults on the other hand understanding the precise mechanisms underlying consumer losses is essential to predicting the impact of mechanism policies aimed primarily at reducing specific frictions or mental gaps without otherwise steering consumers we make the case that papers engaging with these questions empirically should be clear about whether their analyses distinguish between mechanisms behind poorly informed choices and what that implies for the questions they can answer we present examples from several empirical contexts to highlight these distinctions

why do forecasters disagree lessons from the term structure of cross sectional dispersion abstract key sources of disagreement among economic forecasters are identified by using data on cross sectional dispersion in forecasters long and short run predictions of macroeconomic variables dispersion among forecasters is highest at long horizons where private information is of limited value and lower at short forecast horizons moreover differences in views persist through time such differences in opinion cannot be explained by differences in information sets our results indicate they stem from heterogeneity in priors or models differences in opinion move countercyclically with heterogeneity being strongest during recessions where forecasters appear to place greater weight on their prior beliefs

choosing between time and state dependence micro evidence on firms price reviewing strategies because of recent findings based on survey data it is now well known that firms differ from each other with respect to their price reviewing strategies while some firms review their prices at fixed intervals of time others prefer to perform price revisions in response to changes in economic conditions some theories have been suggested to explain this however empirical evidence on the relative importance of the factors that determine the different strategies of firms is virtually non existent in this paper we help to fill this gap by investigating the factors that explain why firms follow time dependent state dependent or both time and state dependent price reviewing rules we find that the strategies of firms vary with firm characteristics that have a bearing on the importance of information costs with the variability of the optimal price and with the sensitivity of profits to non optimal prices

talking heads the effects of ecb statements on the euro dollar exchange rate abstract this paper studies the reaction of the conditional mean and volatility of the euro dollar exchange rate to statements by european central bank and national central bank officials we focus on comments on monetary policy and the external value of the euro we find that the bundesbank has dominated the news coverage we conclude that ecb statements have mainly influenced conditional volatility in some cases there are effects of statements on the conditional mean of the euro dollar exchange rate efforts to talk up the euro have generally not been successful there is also evidence of asymmetric reactions to news

foundations for optimal inattention abstract this paper models an agent who has a limited capacity to pay attention to information and thus conditions her actions on a coarsening of the available information an optimally inattentive agent chooses both her coarsening and her actions by maximization of an underlying subjective expected utility preference relation net of a cognitive cost of attention the main result axiomatically characterizes the conditional choices of actions by an agent that are necessary and sufficient for her behavior to be seen as if it is the result of optimal inattention observing these choices permits unique identification of the agent s utility index the information to which she pays attention her attention cost and her prior whenever information is costly

disagreement in inflation expectations empirical evidence for colombia the literature on expectation disagreements in emerging economies is scarce this paper examines the disagreements in inflation expectations for the colombian economy during the 2010 2017 period w

inflation and inflation volatility in thailand abstractquarterly data for thailand are used in this article for the period 1965q3 2013q4 to investigate both the relationship between inflation and inflation volatility and the impact of inflation volatility on economic growth inflation volatility is estimated by deploying the generalized autoregressive conditional heteroscedastic garch technique a granger causality test is then conducted to examine the causality between inflation and inflation volatility the empirical results obtained are consistent with a number of theoretical propositions first the results are consistent with the friedman ball proposition which states that a rise in inflation raises inflation volatility second there is evidence supporting the holland proposition that inflation volatility lowers the rate of inflation this is consistent with the view that central banks attempt to stabilize inflation with the rise in inflation volatility third empirical results obtained by asymmetric garch models suggest that inflation shoc

what can survey forecasts tell us about information rigidities a lot we derive common and conflicting predictions from models in which agents face information constraints and then assess their validity using surveys of consumers firms central bankers and professional forecasters we document that mean forecasts fail to completely adjust on impact to shocks leading to statistically and economically significant deviations from the null of full information the dynamics of forecast errors after shocks are consistent with the predictions of models with information rigidities the conditional responses of forecast errors and disagreement among agents can also be used to differentiate between some of the most prominent models of information rigidities

monetary policy shocks expectations and information rigidities this paper contributes to the literature by assessing expectation effects from monetary policy for g7 economies we rely on expectation data from consensus economics and a panel vector autoregression framework which accounts for international spillovers and time variation we analyze whether monetary policy has changed the degree of information rigidity after the emergence of the subprime crisis and estimate effects of interest rate changes on expectations disagreements and forecast errors we find strong evidence for information rigidities and identify higher forecast errors by professionals after monetary policy shocks our results suggest that the international transmission of monetary policy shocks introduces noisy information and partly increases disagreement among forecasters jel e31 e52

a dynamic analysis of the adoption of a new technology the case of optical scanners two p roportional hazard models are used to investigate the differingeffects of marke t structure variables on the conditional probabilityof a firm initially adoptin g the new technology of optical scanners as the innovation spreads through the f ood store industry during the early stage leading firms with large average sto re size which are not members of chains and which operate in less concentrated m arkets with higher incomes and wage rates tend to adopt scanners sooner later on differences in seller concentration market share and size become less impo rtant as other firms follow prior adoptions copyright 1987 by mit press

market segmentation and the diffusion of quality enhancing innovations the case of downhill skiing we report econometric results concerning the diffusion of detachable chairlifts in the united states that provide the first empirical evidence that the adoption of a technological innovation by a firm decreases the likelihood that a local competitor will also adopt it we model the effect that an innovation in service speed has on a f s incentive to differentiate the quality of its service from that of its competitors in our model the incentive to adopt is negatively related to the number of competitors who have already adopted our empirical results support this hypothesis

rival precedence and the dynamics of technology adoption an empirical analysis this study employs information on the adoption of automatic teller machines by banking firms to examine the nature of firm reactions to rival precedence in the adoption process using a failure time estimation procedure it is found that the ado ption of this innovation by rivals increases the conditional probabil ity that a decision to adopt will be made the effect of spillovers f rom technology adoption and the interaction of market concentration a nd rival precedence are also investigated finally the study shows w ith an example how the estimation procedure may be used to test the u nderpinnings of diffusion processes copyright 1987 by the review of economic studies limited

the role of media for inflation forecast disagreement of households and professional forecasters this paper investigates the effects of media coverage about consumer price inflation on inflation forecast disagreement of german households and professional forecasters we adopt a bayesian learning model in which media coverage of inflation affects forecast disagreement by influencing information sets as well as predictor choice our empirical results show that disagreement of households depends on the heterogeneity of story content and on the reporting intensity especially of news on rising inflation disagreement of professional forecasters does not depend on media coverage with respect to the influence of macroeconomic variables we provide evidence that disagreement of professional forecasters primarily depends on the inflation rate and on inflation volatility the response of households to inflation is much less pronounced

sources of disagreement in inflation forecasts an international empirical investigation abstract central to the conduct of monetary policy are inflation forecasts inflation forecasts are not unique central banks and professional organizations generate inflation forecasts while households are surveyed about their inflation outlook this paper estimates inflation forecast disagreement for nine economies over the 1999 2009 period five of which target inflation i find that central bank transparency tends to increase forecast disagreement to the extent this reflects the attention paid to inflation performance the implication is that transparency is beneficial moreover this finding does not appear to be a feature that applies only to central banks that must adhere to an inflation target

setting the right prices for the wrong reasons we consider a model of nominal price adjustment with firm specific and aggregate shocks to economic fundamentals and incomplete dispersed information firms update their expectations about fundamentals based on their own cash flows revenues and wages we show that in a model with realistic levels of product level price dispersion the firms inference about aggregate shocks is very gradual yet in the aggregate prices adjust rapidly in response to aggregate nominal shocks when an aggregate shock occurs firms mistakenly attribute it to firm specific shocks but adjust prices nevertheless since the exact nature of the shock matters little for its optimal pricing decision

one size fits all policy instruments should fit the segments of target groups abstract in order to meet the kyoto co2 reduction targets technical innovations in the field of energy efficiency must diffuse more rapidly into a larger market however markets develop gradually especially if innovations are involved diffusion starts with the early market innovators and early adopters followed by the mainstream market the early and late majority and ends with the laggards the actors in these markets differ in their willingness to adopt innovations the early market actors have a visionary attitude and the mainstream market actors are more pragmatic in order to choose policy instruments that will most effectively influence these two markets within the target group of housing association we addressed the following two questions 1 what are the differences between the early and mainstream market actors from a behavioural change point of view 2 in what way do existing policy instruments differ in influencing the behaviour of these actors we analyzed early market and mainstream decision making behaviours and how the active ingredients in policy instruments specifically target the characteristics of the two markets mainstream instruments should intervene as early as possible in the decision making process and emphasize communication about advantages such as comfort and quality in addition to money and energy savings furthermore they should present energy conservation as a solution to an actual problem instead of bureaucratic subsidy systems for the mainstream the motto should be cash on the barrel head early market actors are highly internally motivated implying that early market interventions have to be challenging and facilitating

were there regime switches in u s monetary policy working paper 2004 14 june 2004 abstract a multivariate model identifying monetary policy and allowing for simultaneity and regime switching in coefficients and variances is confronted with u s data since 1959 the best fit is with a model that allows time variation in structural disturbance variances only among models that also allow for changes in equation coefficients the best fit is for a model that allows coefficients to change only in the monetary policy rule that model allows switching among three main regimes and one rarely and briefly occurring regime the three main regimes correspond roughly to periods when most observers believe that monetary policy actually differed and the differences in policy behavior are substantively interesting though statistically ill determined the estimates imply monetary targeting was central in the early 80s but was also important sporadically in the 70s the changes in regime were essential neither to the rise in inflation in the 70s nor to its decline in the 80s jel classification e52 e47 c53 key words counterfactuals lucas critique policy rule monetary targeting simultaneity volatility model comparison i the debate over monetary policy change in an influential paper clarida gali and gertler 2000 cgg presented evidence that us monetary policy changed between the 1970 s and the 1980 s indeed that in the 70 s it was drastically worse they found that the policy rule apparently followed in the 70 s was one that when embedded in most stochastic general equilibrium models would imply non uniqueness of the equilibrium and hence vulnerability of the economy to sunspot fluctuations of arbitrarily large size their estimated policy rule for the later period on the other hand eliminated this indeterminacy these results are a possible explanation of the volatile and rising inflation of the 70 s and of its subsequent decline the cgg analysis has two important weaknesses one is that it fails to account for stochastic volatility us macroeconomic variables and particularly the federal funds rate have gone through periods of tranquility and of agitation with forecast error variances varying greatly from period to period ignoring such variation does not lead to inconsistent estimates of model parameters when the forecasting equations themselves are constant but it strongly biases toward a finding of changed parameters tests of the stability of the forecasting equations the other weakness is that the cgg analysis rests on powerful and implausible identifying assumptions they require that we accept that the response of the monetary authority to expected future inflation and output does not depend on the recent history of inflation money growth or output it is hard to understand why this should be so especially in the 70 s when monetarism was a prominent theme in policy debates congress was requiring reports from the fed of projected time paths of monetary aggregates and financial markets were reacting sensitively to weekly money supply numbers the requirement for existence and uniqueness of equilibrium in dynamic models is that the monetary policy rule show a more than unit response of interest rates to the sum of the logs of all nominal variables that appear on the right hand side of the reaction function if we force a particular measure of expected future inflation to proxy for all the nominal variables that actually appear independently in the reaction function we are bound to get distorted conclusions on the one hand because expected future inflation will be a noisy measure of the full set of nominal influences on policy we might get downward bias in our estimates from the usual errorsin variables effect on the other hand to the extent that expected future inflation like most expected future values shows less variation than current nominal variables we could find a mistaken scaling up of coefficients

commercial loan borrower s optimal borrowing and prepayment decisions under uncertainty we model a firm which faces continuing stochastic money needs and fluctuating interest rates the borrower minimizes the expected present value of the sum of interest payments and prepayment penalty costs subject to a liquidity constraint since contingent opportunities are absent from the model we find i the firm should not inventory cash ii the firm should prepay the maximum amount possible if it prepays at all

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting