YL

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FISHER

As always, Professor WoLb has given us an interesting paper
My remarks are in the nature of supplements.
In the first place, I am interested in the case of bi-expectational
 interdependent systems. As Professor Worp has shown, in
this case the elasticity of demand for example becomes elasticity
in terms of expected rather than actual price, where expected is
interpreted as the expected value of price given by the reduced
form equations. Now there is of course another sense of expectation
in economics; that is the sense in which a variable is expected by
people who make a decision based on it. An interesting question, it
seems to me, is under what circumstances and in what types of
models this will in fact be the same as the expected price given
from the reduced form. Only in such circumstances will it be the
case that elasticity with respect to expected price in fact is a meaningful
 parameter which describes interesting behavior. I suspect
that the two coincide in a rather general framework. There is in
the literature a hypothesis known as the rational expectations hypothesis
 due largely to JouN MurtH, according to which it is assumed
that the decision makers who are being studied expect the values
of the relevant variables to be those on the average which will be
predicted by the model. MuTH has shown that this is not logically
circular, Further, in this context it sounds like the sort of behavior
which would lead decision makers to expect that price predicted by
the reduced form

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Wold - pag. 53