Early Rational-Expectations Proponents Criticized Orthodox-Keynesian Models Because Keynesian Models Assume Nobody Learns from Experience

The most dramatic mainstream response to the crisis in Keynesian economics was the development of the "Rational Expectations" approach to macroeconomics. In the hands of Robert E. Lucas (1972), Thomas Sargent and Neil Wallace (1975), Robert Barro (1976), and others, the Rational-Expectations story was at once a critique of Orthodox-Keynesian reasoning as well as an alternative to it. The grounds on which early Rational-Expectations proponents criticized Orthodox-Keynesian models were quite sound. In its simplest form, their argument was that Keynesian models, and particularly Keynesian policy conclusions, were based on the illogical proposition that economic agents, in reacting to fiscal and monetary variable changes, will make systematic errors. Rather than learning from the experience of past policy, they will react the same way each time to, say, countercyclical changes in the money supply. It would be impossible to gauge the amount of stimulus or restraint needed in a given situation if agents reacted differently with learning, but Orthodox-Keynesian models, even the most complicated, were based on the assumption of an intertemporally stable behavioral structure of the economy. As Roger Garrison and I have pointed out, this basic truth of the Rational Expectations school was anticipated by Mises as early as 1953.

--Don Bellante, "The Fork in the Keynesian Road: Post-Keynesians and Neo-Keynesians," in Dissent on Keynes: A Critical Appraisal of Keynesian Economics, ed. Mark Skousen (New York: Praeger Publishers, 1992), 122-123.