Rational Herds: Economic Models of Social Learning Christophe P. Chamley

Penguins jumping off a cliff, economic forecasters predicting a recovery in the business cycle, financial advisors for the stock market speculating against a currency, and farmers using new seeds in India are all practicing social learning. Such learning from the behavior of others can lead to herds, crashes, and booms. These issues have become, over the last ten years, an exciting field of research in theoretical and applied economics, finance and other social sciences. This book provides both an informal introduction and in-depth insights into the most recent advances. The properties of social learning depend on the context in which learning and actions take place. Each chapter is devoted to a separate issue: Individuals learn from the observations of actions, from the outcomes of these actions, and from what others say. They may delay or make an immediate decision; they may compete against others or gain from cooperation; they make decisions about capital investment, crop choices, and financial investments. The book highlights the similarities and the differences between the various cases. A recurrent theme is that society may learn more if individuals are less than perfectly rational in their interpretation of others' behavior. Christophe Chamley is Professor of Economics at Boston University and a Director of Studies at the Ecole des Hautes Etudes en Sciences Sociales, Paris. He had also held teaching or visiting positions at Yale Universities, the Hoover Institution, the World Bank, Universidad Carlos III (Madrid), the Universite' Louis Pasteur (Strasbourg), and MIT. Professor Chamley's research had appeared in the leading journals of economics, including the American Economics Review, Econometrica, the Journal of Political Economy, the Quarterly Journal of Economics, and the Review of Economic Studies. He was named a Fellow of the Economic Society in 1995. His research interests continue to focus on the economics of information, theoretical macro-economics, monetary economics, public economics, and public economic history. Professor Chamley received his doctorate from Harvard University.