Uncertainty and Risk

Huffington Post Features INET Financial Stability Documentary, With Introduction by Rob Johnson

The Huffington Post spotlights the INET financial instability video, produced by Four Corners Media, accompanied by an extensive written introduction from INET Executive Director Robert Johnson.

This video is the first in a series of mini-documentaries that will address vital areas in new economic thinking.

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Mehrling on Soros

 

The text below is the comment I offered on Mr. Soros' opening speech at INET's Berlin Conference April 12, 2012.  The text of Mr. Soros' own speech is here.  Video of the entire session is below--my bit starts at 55:00.

 

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William Lazonick - How Government Helps, and Wall Street Hurts, the Innovative Enterprise

About the Interview

Innovation drives economic growth and welfare, and the industrial corporation drives innovation, says William Lazonick. But just how do corporations innovate? The key idea is commitment. People with knowledge of and experience in particular industries commit to a business model that ventures into unknown territory. The main problem is that modern financiers are not prepared to support commitment, and the modern executive pushes for stock buy-backs -- that is how Wall Street undermines innovation. Understanding how organization drives innovation -- this is new economic thinking. Read more

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Scott Condie - Modeling Asset Markets when Knowledge is Ambiguous

About the Interview

When you flip a coin, you expect heads and tails to show up with a 50% chance each. But what if all you knew was that heads and tails each have a chance of at least 25%? That's how Scott Condie captures Knightian uncertainty in asset markets. He models investors who act on basis of ambiguous knowledge, with the result that asset prices fail to reflect all private information. This is financial market modeling beyond the efficient market hypothesis - this is new economic thinking. Read more

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David Tuckett - How Investors Use Stories to Tame Uncertainty

About the Interview

If you want to understand how fund managers choose a portfolio, why not ask them? That’s what David Tuckett does: he draws on standard sociological techniques of interviewing to understand investors’ decisions to buy or sell assets. He says financial markets cannot be driven by economic fundamentals – because the future is uncertain – instead, they are driven by stories about fundamentals. David Tuckett merges insights from Keynes, from sociology, and from psychoanalysis to develop what he calls emotional finance – this is new economic thinking. Read more

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Understanding Macroeconomic Fragility

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The 2008-2009 worldwide financial crisis has reminded us all, that economic systems can be quite fragile. Understanding this fragility is crucial in order to formulate appropriate policy responses and strategies for the future, such as macro-prudential regulation, but also for identifying the private-sector risks and opportunities arising out of this fragility. Read more

An International Network on Expectational Coordination

Project Leader: 

The view of the future held by participating agents is a key determinant of economic activity. Correspondingly, the understanding of expectational coordination is a central question of economic theory. Read more

Advancing Imperfect Knowledge Economics

Project Leader: 

Instability is an inherent feature of financial markets, and more broadly of capitalist economies. Long before the financial crisis that began in 2007, leading economists acknowledged that contemporary models are of little help in understanding this instability. Read more