Muth on expectations

This is all you need to know:

... expectations are influenced by the actual course of events.

- John F. Muth

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A slightly less abridged version? No problem:

... the character of dynamic [economic] processes is typically very sensitive to the way expectations are influenced by the actual course of events.

The way the economy works, Muth says, is "typically" (meaning always or almost always) sensitive, no, very sensitive to the way expectations are formed, and, by the way, expectations are formed in response to the actual course of events.

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The whole sentence? You sure you're up for it? Okay:

What kind of information is used and how it is put together to frame an estimate of future conditions is important to understand because the character of dynamic processes is typically very sensitive to the way expectations are influenced by the actual course of events.

We can shorten it without losing meaning by eliminating the middle part:

What kind of information is used and how it is put together to frame an estimate of future conditions is important to understand because ... expectations are influenced by the actual course of events.

It helps to know that Muth is talking about economic processes, and that he says expectations are very sensitive to events. But the shortened version is sound.

And then, the first part of it -- "What kind of information is used and how it is put together to frame an estimate of future conditions is important to understand" -- is why he wrote the paper.

And the last part of it -- "expectations are influenced by the actual course of events" -- is the foundation upon which Muth builds his argument. And this brings us back to where we started. 

Merry Christmas.