A bottle of nice champagne …

A bottle of nice champagne to the one who publishes a reply Steinar Juel's op-ed in today's Dagens Næringsliv where she/he clears up a few elementary misconceptions and conveys fundamental insights, like:

• So-called "rational expectations" is a consistency condition.
• It is a weak condition and the very opposite of "perfect foresight". Contrary to what people like Juel seem to believe, in a dynamic, stochastic model it implies that firms and individuals always are making mistakes.
• Competitive markets are not the same as laissez faire. On the contrary, under laissez faire markets would not be "competitive".
• So-called "representative agent" models try to account for the actions of individuals filtered through a set of (endogenously and exogenously given) institutions. Those institutions matter a lot.
• It is obvious that people might have certain biases. The set of long-run time-consistent policies and institutions we set up will therefore matter a lot.