Do Households Have Rational Expectations on Future Consumption? Evidence from the Finnish Consumer Survey

Ever since its initial introduction some fifty years ago, the rational expectations paradigm has dominated the way economic theory handles uncertainty. The main assertion made by John F. Muth (1961), seen by many as the father of the paradigm, is that expectations of rational economic agents should essentially be equal to the predictions of relevant economic theory, since rational agents should use information available to them in an optimal way. This assumption often has important consequences on the results and interpretations of the models where it is applied. Although the rational expectations assumption can be applied to virtually any economic theory, the focus in this thesis is on macroeconomic theories of consumption, especially the Rational Expectations–Permanent Income Hypothesis proposed by Robert E. Hall in 1978. The much-debated theory suggests that, assuming that agents have rational expectations on their future income, consumption decisions should follow a random walk, and the best forecast of future consumption level is the current consumption level. Then, changes in consumption are unforecastable. This thesis constructs an empirical test for the Rational Expectations–Permanent Income Hypothesis using Finnish Consumer Survey data as well as various Finnish macroeconomic data. The data sample covers the years 1995–2010. Consumer survey data may be interpreted to directly represent household expectations, which makes it an interesting tool for this particular test. The variable to be predicted is the growth of total household consumption expenditure. The main empirical result is that the Consumer Confidence Index (CCI), a balance figure computed from the most important consumer survey responses, does have statistically significant predictive power over the change in total consumption expenditure. The history of consumption expenditure growth itself, however, fails to predict its own future values. This indicates that the CCI contains some information that the history of consumption decisions does not, and that the consumption decisions are not optimal in the theoretical context. However, when conditioned on various macroeconomic variables, the CCI loses its predictive ability. This finding suggests that the index is merely a (partial) summary of macroeconomic information, and does not contain any significant private information on consumption intentions of households not directly deductible from the objective economic variables. In conclusion, the Rational Expectations–Permanent Income Hypothesis is strongly rejected by the empirical results in this thesis. This result is in accordance with most earlier studies conducted on the topic.

The Enlightenment Idea of History as a Legitimation Tool of Kemalism in Turkey

The study analyzes the effort to build political legitimacy in the Republic of Turkey by ex-ploring a group of influential texts produced by Kemalist writers. The study explores how the Kemalist regime reproduced certain long-lasting enlightenment meta-narrative in its effort to build political legitimacy. Central in this process was a hegemonic representation of history, namely the interpretation of the Anatolian Resistance Struggle of 1919 1922 as a Turkish Revolution executing the enlightenment in the Turkish nation-state. The method employed in the study is contextualizing narratological analysis. The Kemalist texts are analyzed with a repertoire of concepts originally developed in the theory of narra-tive. By bringing these concepts together with epistemological foundations of historical sciences, the study creates a theoretical frame inside of which it is possible to highlight how initially very controversial historical representations in the end manage to construct long-lasting, emotionally and intellectually convincing bases of national identity for the secular middle classes in Turkey. The two most important explanatory concepts in this sense are di-egesis and implied reader. The diegesis refers to the ability of narrative representation to create an inherently credible story-world that works as the basis of national community. The implied reader refers to the process where a certain hegemonic narrative creates a formula of identification and a position through which any individual real-world reader of a story can step inside the narrative story-world and identify oneself as one of us of the national narra-tive. The study demonstrates that the Kemalist enlightenment meta-narrative created a group of narrative accruals which enabled generations of secular middle classes to internalize Kemalist ideology. In this sense, the narrative in question has not only worked as a tool utilized by the so-called Kemalist state-elite to justify its leadership, but has been internalized by various groups in Turkey, working as their genuine world-view. It is shown in the study that secular-ism must be seen as the core ingredient of these groups national identity. The study proposes that the enlightenment narrative reproduced in the Kemalist ideology had its origin in a simi-lar totalizing cultural narrative created in and for Europe. Currently this enlightenment project is challenged in Turkey by those who are in an attempt to give religion a greater role in Turkish society. The study argues that the enduring practice of legitimizing political power through the enlightenment meta-narrative has not only become a major factor contributing to social polarization in Turkey, but has also, in contradiction to the very real potentials for crit-ical approaches inherent in the Enlightenment tradition, crucially restricted the development of critical and rational modes of thinking in the Republic of Turkey.