Imperfect Knowledge

INET’s President introduces a new research program that challenges orthodox assumptions about the limits of economic knowledge

This paper introduces the Knightian Uncertainty Hypothesis (KUH), a new approach to macroeconomics and finance theory.

Asset markets are indispensable in harnessing society’s diverse views and insights about future business performance. But those views are shaped as much by emotion and crowd mentality as by rational expectations.

Asset markets are indispensable in harnessing society’s diverse views and insights about future business performance. But those views are shaped as much by emotion and crowd mentality as by rational expectations.

In the face of  laissez-faire capitalism at home and resurgent nationalism across the globe, INET offers an innovative look at the causes of—and solutions for—the problems that ail a fissuring world economy.

After re-iterating five well-known theorems about the properties of conditional expectations in stationary settings—such as providing unbiased minimum mean square error predictions despite in- complete information, and the law of iterated expectations—we clarify unpredictability and illustrate its prevalence empirically.

In the paper that we present this afternoon, Soren Johansen, Anders Rahbek, Morten Tabor, and I introduce the Qualitative Expectations Hypothesis (QEH) as a new approach to modeling macroeconomic and financial outcomes.

How we can create useful economic theory that recognizes that the future is radically uncertain?

If standard economic theory can’t explain a traffic jam, how can it cope with crises?

Model Ambiguity, Consistent Representations of Market Forecasts, and Sentiment 

“The humility to accept that economic propositions cannot be universal would save us from self-defeating arrogance.” Economist Amit Bhaduri adds his perspective to our Experts on Trial discussion.

As part of an International Economy symposium, INET Research Director Tom Ferguson assessed the challenge facing central bankers through the lens of the missing virtues of Dorothy’s travel companions in the Wizard of Oz

Notes from the Institute’s Director of Research on some significant papers and contributions produced in 2016 under the INET rubric 

In the 40th anniversary year of John Kenneth Galbraith’s Age of Uncertainty, the 1970s look remarkably stable in comparison with today’s turbulent world 

The Volcker Alliance has launched a series of new papers with important proposals for reforming financial regulations to guard against future crises