The Indeterminate Fate of Sunspots in Economics

60 Pages Posted: 1 Nov 2015 Last revised: 11 Jan 2018

See all articles by Beatrice Cherrier

Beatrice Cherrier

CNRS; University of Cergy-Pontoise - THEMA

Aurélien Saïdi

Université Paris Nanterre

Date Written: November 1, 2015


In this paper, we use archival sources, interviews, bibliometrics, text-mining and correspondance analysis to trace the development of a loose community of economists interested in indeterminacy and sunspots. We propose several explanations for the rise, marginalization and eventual normalization of their models. Sunspots were initially developed by Cass and Shell in reaction to some perceived inconsistencies in Lucas’s 1972 model. The idea that extrinsic beliefs matter in the context of indeterminacy was subsequently disseminated by a loose group of researchers associated with the Center for Analytical Research in Economics and the Social Sciences (CARESS), at the University of Pennsylvania, and the Centre pour la Recherche Economique et ses Applications (CEPREMAP) in France. This group crafted diverging modeling strategies and vocabulary. By the mid-1980s however, several theorists understood that they were interested in common topics – fluctuations, indeterminacy and coordination failures – and attempted to draw connections between OLGs, general equilibrium, non-linear dynamics and game theory models. We explain how this convergence was counterbalanced by several fragmenting forces, and we outline several explanations for the marginalization of these models within economics: they were perceived by macroeconomists to be ultra-sophisticated limit cases devoid of practical relevance, they had no empirical dimension, and they were neglected by policy-makers, in particular central bankers. We end up by describing how a second generation of sunspot theorists attempted to correct these flaws by switching to RBC modeling and calibration, and we provide a few hints on the current state of sunspot models.

Keywords: sunspot, indeterminacy, multiple equilibria, animal spirits, self-fulfilling prophecies

JEL Classification: B20, B22, B23, E10, E32

Suggested Citation

Cherrier, Beatrice and Saïdi, Aurélien, The Indeterminate Fate of Sunspots in Economics (November 1, 2015). Available at SSRN: or

Beatrice Cherrier (Contact Author)

CNRS ( email )

3, rue Michel-Ange
Paris, 75794

University of Cergy-Pontoise - THEMA ( email )

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F-95011 Cergy-Pontoise Cedex, 95011

Aurélien Saïdi

Université Paris Nanterre ( email )

200 Avenue de la République
Nanterre cedex, Nanterre Cedex 92000

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