Evolution and Intelligent Design

Come January will be the annual meeting of the American Economic Association where the superstars of the field gather each year to present papers, look for employees and jobs, and generally hobnob. Here is a description of last year's event from Chris Hayes of The Nation:

It's a Friday night in January, and I am searching for a free drink among 9,000 economists. Every year a sizable portion of the nation's economists descend on some lucky city for the Allied Social Science Associations Annual Meeting, the economics field's largest gathering, a kind of carnival of suits and supply curves. Most academic disciplines have a similar annual convention, but no other can boast the same influence on American politics and policy

And here is another one from David Warsh in his excellent book Knowledge and the Wealth of Nations:

"The Meetings," as its initiates usually call the annual conventions of the Allied Social Science Associations, the agenda dominated by the American Economic Association (AEA), unfold each year like an urban Brigadoon, their location forever shifting among convention cities. On the first weekend after New Year's Day, economists who are members of the AEA and various hangers-on gather in a big hotel -- in several big hotels -- to give talks, learn about the newest ideas, hear ventilated the latest controversies, interview job seekers (or troll of job offers themselves, and just schmooze). Something like 8,000 persons attend, depending on the city; around 12,000 AEA members stay home, content to make their intellectual capital serve for another year. (They can skim the best papers when short versions are published in May.) Perhaps another 18,000 professional economists don't bother with membership in the society. The Meetings are where economics is ceremonially performed by its adherents; they are the capital of a law-governed republic of ideas.

One of the highlights of each year's gathering is the presidential address. January's speech will be delivered by Thomas Sargent of New York University, who together with Nobel winner Robert Lucas in the 1970's were big proponents of rational expectations. Here is the abstract from an early draft of the paper he'll present, titled Evolution and Intelligent Design:

This paper discusses two sources of ideas that influence monetary policy makers today. The first is a set of analytical results that impose the rational expectations equilibrium concept and do 'intelligent design' by solving Ramsey and mechanism design problems. The second is the adaptive learning process that first taught us how to anchor the price level with a gold standard, then how to replace the gold standard with a fiat currency wanting nominal anchors. Models of out-of-equilibrium learning say that such an adaptive evolutionary process will converge to a self-confirming equilibrium (SCE). In an SCE, a government's probability model is correct about events that occur under the prevailing government policy, but possibly wrong about the consequences of other policies. That causes mistakes absent from a rational expectations equilibrium and expands the role of learning.