Owning Up to Uncertainty in Macroeconomics

Furstenberg, George M. von; Jeong, Jinho

doi:10.1057/gpp.1988.2

Geneva Pap Risk Insur Issues Pract

1988

DOI: 10.1057/gpp.1988.2

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Owning Up to Uncertainty in Macroeconomics

George M. von Furstenberg

Jinho Jeong

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Cited by 4 publications

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“…A fact which comforts this argument is the poor stochastic content of the so-called Rational Expectations revolution in macroeconomics. In this theory, it is claimed that "...the average expectation about the state of the economy is an unbiased predictor of actual states..... (von Furstenberg and Jeong [1988], p. 35).…”

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Uncertainty in Macroeconomics and the Microeconomics of Uncertainty

Loubergé

1988

Geneva Pap Risk Insur Issues Pract

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Professor von Furstenberg's lecture on "Uncertainty in Macroeconomics" [1988] has presented a very comprehensive survey of the problems raised in current macroeconomic research. Such a survey was very much needed, because for those economists who do not specialize in macro-theory, there is a widespread opinion that the important issues raised by risk and uncertainty have not been yet seriously considered at the global level. These issues remain largely limited to the fields of microeconomics (Hey [1979]), finance (Copeland and Weston [1974]) and international trade (Helpman and Razin [19781), with some advances into international monetary economics (Frenkel [1983]).In microeconomic theory there is already a long tradition of interest in risk and uncertainty. The relevance of these concepts for the understanding of entrepreneurship and the analysis of market mechanisms was recognized as early as 1921 in the famous book by Frank Knight on Risk, Uncertainty and Profit. The real start of an economic science taking risk and behavior towards riks into account is however credited to the pathbreaking book by John von Neumann and Oskar Morgenstern Theory of Games and Economic Behavior, published in 1947, 40 years ago. Since that time, the most important advances in micro-economic theory were closely associated to the concepts of risk, uncertainty and information. As a result economic theory is now in a much better position to explain how consumers, producers and investors behave, and to analyse how resources are allocated and market imperfections arise. A long list of well-known economists is associated to successive waves of development in the microeconomics of uncertainty. These are, among others, Friedman, Savage, Arrow, Pratt and Ross for the theory of risk-aversion; Sandmo, Leland, Drèze and Modigliani for its application to the traditional microeconomic chapters on consumer behavior, the theory of the firm and the theory of the labor market; Arrow and Debreu for the theory of general equilibrium under uncertainty; Radner, Stiglitz, Rothschild, Grossmann, Laffont, Heliwig and many others for the economics of information and its recent extension: the theory of contracts.

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Uncertainty in Macroeconomics and the Microeconomics of Uncertainty

Loubergé

1988

Geneva Pap Risk Insur Issues Pract

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Index for The Geneva Papers on Risk and Insurance, 1976 Through 1989

Lee

1991

Geneva Pap R I-Iss P

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Index for the Geneva Papers on Risk and Insurance 1976 Through 1989

1991

Geneva Pap Risk Insur Issues Pract

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Owning Up to Uncertainty in Macroeconomics

Cited by 4 publications

References 240 publications

Uncertainty in Macroeconomics and the Microeconomics of Uncertainty

Uncertainty in Macroeconomics and the Microeconomics of Uncertainty

Index for The Geneva Papers on Risk and Insurance, 1976 Through 1989

Index for the Geneva Papers on Risk and Insurance 1976 Through 1989

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