Workshop organized by Centro de Modelamiento Matemático, Universidad de Chile y Banco Central.   
 
Co-chair: Roger Guesnerie (College de France) and Alejandro Jofré (CMM) 
 
Goals: In spite of an intense academic activity over previous decades, the current crisis suggests that economic theory has failed to provide an appropriate global understanding of the recent events. Two key assumptions underlying most existing theories have been rightly questioned:  
 
One group of critics has proposed that agents in financial markets are less rational than has been assumed in most economists’ models. Departures from the standard paradigm of rationality constitute the substance of what has come to be known as behavioral economics. Integrating behavioral economics into finance is clearly a promising avenue for research.  
 
A second group of critics questions the “rationality of expectations”. The Rational Expectations Hypothesis (REH) assumes that economic agents have an unbiased, statistically correct, view of the future. REH is not a consequence of the classic Rationality Hypothesis, nor is the standard Rationality Hypothesis a necessary ingredient of models fitting REH. (Non-expected utility maximizers may be given rational expectations.) Hence this second axis is conceptually distinct and broadly independent of the first one.  The present workshop focuses on the second direction, the critique of REH. Indeed, most theories in finance, as well as in macroeconomics, have tended to adopt REH axiomatically. Many have been argued that REH, in its standard version, has fuelled the excessive confidence in the self-regulating capabilities of the system, which may have been at the heart of its failures in the recent “crisis”. The purpose of the workshop is both ambitious and straightforward, that is, confronting our theorist's assessment of the rational expectations hypothesis, and discussing the most promising lines of research for renewing the economic reflection on the basic issue of expectational coordination.