The anthropologist Edward Evans-Pritchard described the fallacy of “if I were a horse”. Since we have not been, and never will be, horses, our speculations are unlikely to connect with reality. We should not use categories derived from our own experience to interpret behaviour in a different culture and environment.
Ronald Coase, the Nobel laureate in economics who will shortly celebrate his 101st birthday, described how his colleague, Ely Devons, extended the metaphor. “Let’s wonder,” Devons mused, what an economist would do if he wanted to study horses. He would go to his study and think “what would I do if I were a horse?”
If you think this is far-fetched, consider how one might study how participants in financial markets form and revise their expectations. You might start with the extensive literature on learning created by psychologists and educators. You would interview analysts and traders, hoping to understand what kind of information they used, how they processed that information, and how their views of the future evolved. These investigations would suggest hypotheses that could be tested against actual future behaviour.