This isn’t REALLY the point of your (nice) piece, but the title provides an opportunity to plant a flag and point out: “predictably updating” is not necessarily bad or irrational. Unfortunately I don’t have time to write up the full argument right now, hopefully eventually, but, TLDR:
Bayesian rational learning about a process can be very slow...
...which leads to predictable updating...
...especially when the long-run dynamics underlying the process are slow-moving.
In macroeconomics, this has recently been discussed in detail by Farmer, Nakamura, and Steinsson in the context of “medusa charts” that seem to show financial markets ‘predictably updating’ about interest rates.
But I imagine this issue has been discussed elsewhere—this is not an ‘economic phenomenon’ per se, it’s just a property of Bayesian updating on processes with a slow-moving nonstationary component.
This isn’t REALLY the point of your (nice) piece, but the title provides an opportunity to plant a flag and point out: “predictably updating” is not necessarily bad or irrational. Unfortunately I don’t have time to write up the full argument right now, hopefully eventually, but, TLDR:
Bayesian rational learning about a process can be very slow...
...which leads to predictable updating...
...especially when the long-run dynamics underlying the process are slow-moving.
In macroeconomics, this has recently been discussed in detail by Farmer, Nakamura, and Steinsson in the context of “medusa charts” that seem to show financial markets ‘predictably updating’ about interest rates.
But I imagine this issue has been discussed elsewhere—this is not an ‘economic phenomenon’ per se, it’s just a property of Bayesian updating on processes with a slow-moving nonstationary component.