The Pie: An Economics Podcast
Choosing with Uncertainty
Dec 19, 2024
Lars Peter Hansen, a Nobel Prize-winning economist and expert in uncertainty, dives into the complexities of decision-making amidst unpredictability. He discusses how policymakers can navigate uncertainty and the implications of declining public trust in scientific authority. The conversation explores the balance required in climate change decisions, weighing immediate action against the need for more information. Hansen also reflects on the importance of transparent communication in science to enhance public confidence and improve decision-making in challenging contexts.
48:40
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Quick takeaways
- Lars Hansen emphasizes that integrating uncertainty into economic models enhances policymaking by promoting a realistic understanding of complex issues.
- The podcast highlights the importance of transparent communication of uncertainty by scientists to maintain public trust and effective decision-making.
Deep dives
The Importance of Uncertainty in Economics
Uncertainty plays a critical role in the field of economics, as highlighted by Lars Peter Hansen's work on the generalized method of moments (GMM). This method allows for flexible estimation without requiring simultaneous knowledge of all variables, accommodating the inherent uncertainty in economic data. Hansen argues that acknowledging and integrating uncertainty can enhance economic models and promote better policymaking. By recognizing that we do not possess complete knowledge, economists can better navigate the complexities of real-world issues while embracing the limitations of their understanding.
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