Michael Goldberg

Todd H. Crockett Professor of Economics
University of New Hampshire

Michael D. Goldberg is the Todd H. Crockett Professor of Economics at the University of New Hampshire and a senior research associate at the Institute for New Economic Thinking (INET). He has written extensively in the fields of International Finance and Macroeconomics and his columns on asset price fluctuations and policy reform have been published by leading newspapers in more than 50 countries. His bestselling books, Imperfect Knowledge Economics: Exchange Rates and Risk (Princeton University Press, 2007) and Beyond Mechanical Markets: Asset Price Swings, Risk, and the Role of the State (Princeton University Press, 2011) both co-authored with Roman Frydman, propose a new approach to macroeconomic modeling that recognizes that rational individuals’ decision making and the social context within which they must act change in ways that are, in part, open. Beyond Mechanical Markets was a finalist for the 2011 TIAA-CREF Paul A. Samuelson Award. The book was also one of the Financial Times non-fiction favorites of 2011, commended by its chief economics commentator, Martin Wolf, and James Pressley of Bloomberg News selected it as a top business book of 2011. Both Imperfect Knowledge Economics and Beyond Mechanical Markets are translated into multiple foreign languages.

My Content

We call attention to the class of models that serve as the foundation for the rational expectations hypothesis (REH). Models in this class rule out completely any structural change that cannot be fully anticipated with a probabilistic or other quantitative rule. REH models are abstractions of rational decision-making, but only in a hypothetical world in which participants can fully anticipate when and how they might revise their understanding of the process driving outcomes. We propose a new rational expectations hypothesis (NREH) as a way to represent rational decision- making in real-world markets. NREH builds on the insights of Muth (1961) and Lucas (1972, 2001) and imposes internal coherence between the economist’s under- standing of outcomes and that of the market.

Shiller (1981) and others have shown that the quantitative predictions of the REH present-value model are inconsistent with time-series data on stock prices and dividends. In this paper, we assess the empirical relevance of the model without explicitly representing how a rational market participant forecasts dividends and interest rates. We find that stock prices are driven largely by news about fundamental factors. Moreover, this news moves prices through changes in the market’s forecasts of dividends and/or interest rates in ways that are remarkably consistent with the present-value model.

My Video Content

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How do you model the unmodelable? By taking seriously the idea of non-routine change. Simply put, change in capitalist economies is to a significant degree non-routine, and thus cannot be adequately forecasted or represented in advance with mechanical rules and procedures. In this groundbreaking area of inquiry, four INET grantees lead the way.

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Michael Goldberg, Roland H. O'Neal Professor, Whittemore School of Business and Economics, University of New Hampshire speaking at the breakout panel entitled "Instability in Financial Markets: Sources and Remedies" at the Institute for New Economic Thinking's (INET) Paradigm Lost Conference in Berlin. April 14, 2012. #inetberlin

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Discussion and Q&A at the panel entitled "Managing the Global Commons: Growth, Inequality, and New Thinking for Sustainable Economics" at the Institute for New Economic Thinking's (INET) Paradigm Lost Conference in Berlin. April 14, 2012. #inetberlin

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The Inaugural Conference @ King's, Institute for New Economic Thinking, Session 2: Has the Efficient Market Hypothesis Led to the Crisis? Collapsed with The Crisis?

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The Inaugural Conference @ King's, Institute for New Economic Thinking, Session 2 Q&A: Has the Efficient Market Hypothesis Led to the Crisis? Collapsed with The Crisis?