[4] His body of work has advanced the view that beliefs are a new fundamental in economics that have the same methodological status as preferences, technology, and endowments.
[5] In his 1993 book, Macroeconomics of Self-fulfilling Prophecies,[6] he argues that beliefs should be modeled with the introduction of a Belief Function, which explains how people form ideas about the future based on things they have seen in the past.
In his 2010 book, Expectations, Employment and Prices,[7] he suggests an alternative paradigm to New Keynesian economics which reintroduces a central idea from John Maynard Keynes' The General Theory of Employment, Interest and Money; that high involuntary unemployment can persist as a permanent equilibrium outcome.
Farmer's policy proposal to achieve full employment by controlling and stabilizing asset prices shows promise as a way to help prevent stock market crashes and deep recessions.
His son is the economist Leland Edward Farmer, who joined the faculty at the University of Virginia in July 2017.