Essay 52: Economics Reconsidered to Include Uncertainty

Standard definitions for economics say that it is about “cost-benefit” thinking. Everything costs time or money or effort or lost opportunities but offers different levels of expected benefit.  Economics, in this view, matches decisions to this “menu” of items and prices.

Actually, that is not a complete description at all because economics is about cost-benefitrisk-uncertainty thinking and that implies one needs to get into the dimensions of risk and uncertainty. 

A real decision involves more than costs and benefits but implies all kinds of “how can I be sure?” questions which means risk and uncertainty considerations

World-watching modified in this way is explored at (Kellogg School of Management, Northwestern University)

This implies the need for new indicators such as:

Call for papers:  “Uncertainty and Economic Activity:  Global Perspectives” [PDF]

The extraordinary rise in trade policy uncertainty [archived PDF].

Policy News and Stock Market Volatility [PDF].

They say that practitioners of a field are always like general “fighting the last war” not this one, like the French generals in 1940 who were mentally in 1914. 

One must augment all economics textbook talk in this direction of risk-and-uncertainty without which all analyses are like backward-looking “stills” as opposed to forward-looking “moving pictures.”  All standard textbooks are uninformative on these issues.