"Studying this work in real time taught me a lot, but seeing it laid out in conceptual, rather than chronological, order provides even clearer insights into the evolution of this provocative line of research. Hansen and Sargent are two of the best economists of our time, they are also among the most dedicated teachers in our profession. They have once again moved the research frontier, and with this book provide a roadmap for the rest of us to follow. This is a must-have for anyone interested in modeling uncertainty, ambiguity and robustness."Stanley E ZinWilliam R Berkley Professor of Economics and BusinessLeonard N Stern School of BusinessNew York UniversityWritten by Lars Peter Hansen (Nobel Laureate in Economics, 2013) and Thomas Sargent (Nobel Laureate in Economics, 2011), Uncertainty within Economic Models includes articles adapting and applying robust control theory to problems in economics and finance. This book extends rational expectations models by including agents who doubt their models and adopt precautionary decisions designed to protect themselves from adverse consequences of model misspecification. This behavior has consequences for what are ordinarily interpreted as market prices of risk, but big parts of which should actually be interpreted as market prices of model uncertainty. The chapters discuss ways of calibrating agents' fears of model misspecification in quantitative contexts.

Formal economic analysis using Shackle's ideas of historical time and nonprobabilistic uncertainty

This volume brings together important papers, coupled with new introductions, in the massively influential area of uncertainty in economic theory. Seminal papers are available together for the first time in book format, with new introductions and under the steely editorship of Itzhak Gilboa - this book is a useful reference tool for economists all over the globe.

Proposes novel methods to incorporate ignorance and uncertainty into economic modeling without complex mathematics.

Models in Microeconomic Theory covers basic models in current microeconomic theory. Part I (Chapters 1-7) presents models of an economic agent, discussing abstract models of preferences, choice, and decision making under uncertainty, before turning to models of the consumer, the producer, and monopoly. Part II (Chapters 8-14) introduces the concept of equilibrium, beginning, unconventionally, with the models of the jungle and an economy with indivisible goods, and continuing with models of an exchange economy, equilibrium with rational expectations, and an economy with asymmetric information. Part III (Chapters 15-16) provides an introduction to game theory, covering strategic and extensive games and the concepts of Nash equilibrium and subgame perfect equilibrium. Part IV (Chapters 17-20) gives a taste of the topics of mechanism design, matching, the axiomatic analysis of economic systems, and social choice. The book focuses on the concepts of model and equilibrium. It states models and results precisely, and provides proofs for all results. It uses only elementary mathematics (with almost no calculus), although many of the proofs involve sustained logical arguments. It includes about 150 exercises. With its formal but accessible style, this textbook is designed for undergraduate students of microeconomics at intermediate and advanced levels.

A timeless classic of economic theory that remains fascinating and pertinent today, this is Frank Knight's famous explanation of why perfect competition cannot eliminate profits, the important differences between "risk" and "uncertainty," and the vital role of the entrepreneur in profitmaking. Based on Knight's PhD dissertation, this 1921 work, balancing theory with fact to come to stunning insights, is a distinct pleasure to read. FRANK H. KNIGHT (1885-1972) is considered by some the greatest American scholar of economics of the 20th century. An economics professor at the University of Chicago from 1927 until 1955, he was one of the founders of the Chicago school of economics, which influenced Milton Friedman and George Stigler.

At the core of the rational expectations revolution is the insight that economic policy does not operate independently of economic agents' knowledge of that policy and their expectations of the effects of that policy. This means that there are very complicated feedback relationships existing between policy and the behaviour of economic agents, and these relationships pose very difficult problems in econometrics when one tries to exploit the rational expectations insight in formal economic modelling. This volume consists of work by two rational expectations pioneers dealing with the "nuts and bolts" problems of modelling the complications introduced by rational expectations. Each paper deals with aspects of the problem of making inferences about parameters of a dynamic economic model on the basis of time series observations. Each exploits restrictions on an econometric model imposed by the hypothesis that agents within the model have rational expectations.