PP 1859: “Experiences and Expectations: Historical Foundations of Economic Behaviour”

Economic decision-making takes place in a complex environment under considerable uncertainty. To reduce this uncertainty economic actors rely on expectations about the future development of key economic variables. The central purpose of this Priority Program is to investigate how these expectations are formed. Underlying the program is the basic hypothesis that the formation of expectation is not a uniform, standardized and time-invariant process but depends on specific historical contexts. The Priority Program aims at a close integration of historical and economic methods. Three questions dominate our research: First, how does historical experience shape expectations of the future? Second, do expectations change across space and/or time because of differences in culture, institutions, or technology? Third, how do expectations change in the short-term due to economic crises or exogenous shocks? The common goal of this interdisciplinary approach is the study of historical processes of expectation formation. The core research areas are: 1. Financial markets, crises and phenomena of speculation; 2. Firms, innovation and technological change; 3. Households and consumer behaviour; 4. Economic policy and regulation; and 5. Experts and scientific forecasting.