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Muth and Lucas: Call your offices!

Summary:
On his Marginal Revolution blog, Tyler Cowen describes the recent "purge" in the trucking industry. The pandemic shift in demand towards goods, as opposed to services, produced a big increase in the demand for trucking, which in turn produced a huge response, including a  big increase in the number of small trucking companies. Now that is all being reversed, precipitously, with trucking companies falling like flies--the purge.This all sounds very, very "cobwebby" to me. It was Muth's article criticizing the cobweb model that inspired Lucas' "rational expectations revolution." I am old enough to have learned the cobweb model in  a principles course, but I don't know of any modern texts where it appears. We moderns have read Muth and know that rational expectations kill cobwebs.Let's

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 On his Marginal Revolution blog, Tyler Cowen describes the recent "purge" in the trucking industry. The pandemic shift in demand towards goods, as opposed to services, produced a big increase in the demand for trucking, which in turn produced a huge response, including a  big increase in the number of small trucking companies. Now that is all being reversed, precipitously, with trucking companies falling like flies--the purge.

This all sounds very, very "cobwebby" to me. It was Muth's article criticizing the cobweb model that inspired Lucas' "rational expectations revolution." I am old enough to have learned the cobweb model in  a principles course, but I don't know of any modern texts where it appears. We moderns have read Muth and know that rational expectations kill cobwebs.

Let's  syllologize:

If ratex is true, then no cobwebs.

Cobwebs.

Ergo, ratex is false.


qed



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