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Uncertainty, Expectations, and Financial Instability – Reviving Allais's Lost Theory of Psychological Time - Columbia Scholarship Online
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Uncertainty, Expectations, and Financial Instability: Reviving Allais's Lost Theory of Psychological Time

Eric Barthalon


This book applies the neglected theory of psychological time and memory decay of Nobel Prize–winning economist Maurice Allais (1911–2010) to model investors' psychology in the present context of recurrent financial crises. Shaped by the behavior of the demand for money during episodes of hyperinflation, Allais's theory suggests economic agents perceive the flow of clocks' time and forget the past at a context-dependent pace: rapidly in the presence of persistent and accelerating inflation and slowly in the event of the opposite situation. The book recasts Allais's work as a general theory of “ ... More

Keywords: psychological time, memory decay, Maurice Allais, hyperinflation, nominal interest rates, expectations, financial instability, Charles P. Kindleberger, investor behavior, financial crises

Bibliographic Information

Print publication date: 2014 Print ISBN-13: 9780231166287
Published to Columbia Scholarship Online: November 2015 DOI:10.7312/columbia/9780231166287.001.0001


Affiliations are at time of print publication.

Eric Barthalon, author
AIM - Allianz Investment Management SE

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Part One The Progressive Emergence of Expectations in Economic Theory

Part Three Transposing the HRL Formulation to Financial Markets

Part Four The HRL Formulation and Financial Instability