"The "rational expectations" school holds that agents do not know the future, but they formulate their expectations on the basis of a satisfactory knowledge (i.e., a theory) of how the economy functions. If we add propositions to the effect that each agent's decisions are based on its maintained theory of system behavior, that general equilibrium theory is an apt representation of the world, and that those whose behavior is consistent with this apt theory will be successful, then an equilibrium and equilibrating view of the economy emerges. … If the economy does not conform to the general equilibrium theory, if it is endogenously unstable, and if units behave accordingly, then rational expectations will exacerbate instability."