- plural noun what people think will happen. Expectations have a major influence on economic decisions in particular in times of uncertainty when there is no clear picture of future trends.
- (written as Expectations)Although expectations cannot be directly observed, economists have incorporated them into their (mostly macroeconomic) models. Adaptive expectations are ones in which people make adjustments to their expectations in response to a difference between what they previously expected but have now actually experienced. For example, when studying price or premium inflation this might be modelled by creating a new expectation consisting of the past expectation of inflation (with a weight) plus the actual inflation experienced (with a weight), the weights summing to unity. Rational expectations are 'rational' in the sense of being consistent with the economic model in which they are embodied (for example, if the model predicts that inflation will rise in response to an exogenous change, then that will be a rational expectation) and also in the sense that the individuals possessing them will use all the available information in forming their expectations about the future. From another perspective, however, it would seem 'irrational' to ignore the costs of acquiring and interpreting 'information' - so it may not be rational to have rational expectations. In fact, whereas the idea of rational expectations was widely used in macroeconomics, in health economics it has barely surfaced at all.
- plural noun hopes of what is to come
- plural noun ideas that a person has about what other people expect them to do, how to behave etc.