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How do we predict the future? How do our expectations of the future affect the decisions we make? UO economist George Evans wants to understand how businesses and people truly formulate the economic expectations that lead them to make certain decisions. This is especially important to Evans because he feels previous theory has given individuals too much credit for sophisticated, rational decision-making. “What I’m worried about is the difficulty individuals have—both businesses and people or households —in their ordinary decision-making. The difficulties they have in forecasting the future are quite important for the macroeconomy,” Evans says.
Macroeconomics looks at the economy in aggregate. “It’s the area of economics that looks at things like business cycles, what determines the nation’s unemployment rate, balance of trade, inflation rate—so it’s really looking at the economy as a whole,” Evans says.
Inextricably linked with questions of the future is the process by which people form expectations. After all, an individual’s or business’s ordinary decision-making is based on expectations. If a person is planning for retirement, buying a house or investing in education, he must look forward decades, or at least years. Businesses considering changes constantly need to predict the state of the economy. “Expectations are absolutely central to macroeconomics,” Evans says.
Evans is also working to understand the ways in which individuals, businesses and policymakers may differ in their expectations and predictions. Macroeconomics is influenced by policymakers in two general areas: monetary policy, which controls the money supply and interest rates; and fiscal policy, or government spending and taxes. Policymakers try to forecast the future as well. “But,” asks Evans, “how smart are they, and do they forecast in the same way businesses and individuals do?” These issues are of great concern in stabilizing today’s economy.
Prior to coming to the UO in 1994 as the first John B. Hamacher Professor of Economics, Evans divided his time between the U.S. and the U.K. He has held appointments at the Universities of Stirling and Edinburgh in Scotland and the London School of Economics, as well as Stanford University.
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