About the Speech
How do economists and key players in the macroeconomy, such as consumers and enterprises, make decisions despite the doubts and uncertainties they face? How do we understand why financial markets are bold some times and cautious other times? While uncertainty is unavoidable and pervasive in our lives, it often takes a back seat in economic analysis and discussions of economics.
Professor Hansen presented his latest views on the challenges these questions pose to economists and the ways and reasons that we should push uncertainty to the forefront of our thinking. His focus centered on how economists might better integrate uncertainty into their mathematical models so that they can create more meaningful projections of the macroeconomy. Hansen explored three key aspects of uncertainty in model building: risk or what probabilities models assign to events in the future, ambiguity or how much confidence we place in each model; and misspecification or the use of models that are not perfect.
Hansen’s work seeks to identify new ways to address these multiple components of uncertainty in economic analysis. He also hopes to broaden public recognition of the role uncertainty plays in policy design and decision-making.