Edmund Phelps does not think much of rational expectations, the notion that private investors process all available information, so form generally correct expectations regarding the economy.
Q: In the world envisioned by rational expectations, there would be no hyperinflation, no panics, no asset bubbles? Is that right?
A: When I was getting into economics in the 1950s, we understood there could be times when a craze would drive stock prices very high. Or the reverse: An economy in the grip of weak business confidence, weak investment, would lead to loss of jobs in the capital-goods sector. But now that way of thinking is regarded by the rational expectations advocates as unscientific.
By the early 2000s, Chicago and MIT were saying we’ve licked inflation and put an end to unhealthy fluctuations