👉 The Hansen Math, proposed by economist Lars Hansen, is a framework for understanding how economic agents form expectations about the future. It posits that individuals use a Bayesian approach to update their beliefs based on available information and prior expectations, incorporating both rational and adaptive learning processes. The core idea is that agents form expectations by combining their own beliefs (prior distributions) with new information (likelihoods) to derive posterior distributions, which are then used to predict future outcomes. This framework emphasizes the role of uncertainty and learning in decision-making, suggesting that expectations are not static but evolve over time as new data becomes available. Hansen Math provides a nuanced view of how economic agents process information and adjust their forecasts, highlighting the interplay between rationality and learning in economic behavior.
