> I get the argument that the real world is less constrained and more chaotic than chess and that lots of people suck at playing chess anyway, but rational expectations in most models isn't the assumption that every individual in the economy is always right in their predictions, it's the absence of an assumption about the types of mistake the average human must always make in response to policy changes which was explicitly or implicitly embedded in all the non ratex models. A model of chess which assumes the opponent considers the best possible moves available to them will make fewer bad mistakes than one which assumes they always take the pawn even if the opponent isn't very good and likes taking pawns.

Not sure you actually get my argument. I could have articulated it better.

My argument is that there is no such thing as a rational strategy in something as complex and nonlinear as a global economy.

There just isn't. It's not that some participants are more or less rational. It's that you (the implicit analyst in the discussion) have no ability to define rationality at all.

The chess metaphor is to show that in chess which is profoundly simple, the idea of a rational strategy is just barely discernable at best, and only after decades of supercomputing research.

The assumption inherent in the concept of rationality in the context of economics is the argument that one has the ability to base current strategy on the ultimate outcome. But you can't.

The outcome is unknowable and the system is non-linear, often random, and resistant to cause and effect analysis to a degree that the basic premises of rational expectations and EMH type theories are useless. Or to use jargon, economic systems display emergent behavior which does not follow in an orderly fashion from initial inputs.

The only way to proceed in an environment like this is via a heuristic approach. Which, of course, is how agents in economic decisions actually formulate strategy.

The EMH/rational expectations argument implicitly states that there IS an optimal path for agents in the system, and that while it may be difficult to discern for any given participant, the sub-optimal decisions are random and cancel out leading to the system at large acting rationally.

It's bullshit. The world just doesn't work like that. And one of the reasons is that optimal strategy isn't a concept that actually exists, the system isn't orderly. The entire premise is unworkable.

It's as much a disruption of certain classical/neoclassical models as quantum physics is to classical physics. The rules work, until they don't. And when they don't what you thought you knew is worse than useless.