Do Econlog Comments Pass the Rational Expectations Test?
By Bryan Caplan
Yes! The correct answer to the ice cream demand question is that sales went up by 200%. Here’s the histogram of reader’s responses:
When people gave a range, I took the midpoint. When they gave a lower or upper bound, I took the boundary. Thus, “more than x” and “less than x” both got coded as x – I couldn’t think of any better solution.
Here are the summary stats:
If you do a simple regression of the responses on a constant, the constant equals 173.3, with a standard error of 70.1. So we can’t reject the rational expectations hypothesis that the constant equals 200.
As an added bonus, three readers were dead on the money. Well done.