Slow Learning

This paper investigates what features of an economy determine whether convergence under learning is fast or slow. In all of the models that we consider, people’s beliefs about model outcomes are central determinants of those outcomes. We argue that under certain circumstances, convergence of a learning equilibrium to the rational expectations equilibrium can be so slow that policy analysis based on rational expectations is very misleading. We also develop new analytic results regarding rates of convergence in learning models.