Imperfect Knowledge

What happens when professionals lose touch with the people they’re supposed to serve?

Five years after the collapse of the U.S. investment bank Lehman Brothers, the world has still not addressed the fundamental cause of the subsequent financial crisis – an excess of debt. And that is why economic recovery has progressed much more slowly than anyone expected (in some countries, it has not come at all).

Paper revised for the Institute’s Plenary Conference in Berlin

The World Economic Roundtable seeks to help the business, investment, and policy communities understand ongoing changes in the world economy and to promote a discussion of ideas that can advance the goal of a widely shared global prosperity.

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.