Continuing Conversation... Hansen on Risk, Ambiguity, and Measurement
By Amy Willis
What are your thoughts on this topic? Use the prompts below the fold to start your own offline conversation.
Check Your Knowledge:
1. What is regulatory capture, which Roberts notes as a concern he has about the use of models of risk? To what extent is Roberts’s concern justified?
2. What are the different components of uncertainty, according to Hansen?
3. Roberts asks Hansen in what areas within economics have we improved the precision of our knowledge. Do you agree with his response? Why? Are there other areas you might suggest that have recently benefited from greater quantitative precision?
4. Nassim Taleb tells the story of the person lost in Paris who finds a map of New York and thinks, well, it’s better than nothing. It has to help. His point is that false precision or scientism isn’t just unhelpful, it can be dangerous because it leads you to think that know more than you do. Hansen clearly recognizes the limitations of formal models and statistical techniques. Do you think the economics profession has sufficiently internalized this lesson? How might economists insulate themselves more effectively from self-deception?
5. Taking points from Hansen’s Nobel address and/or Hayek’s Nobel address, answer the following question: To what extent is economics a scientific enterprise? Do quantitative models add to our stock of knowledge, or do they deceive us into thinking economics is more scientific than it really is?