Acknowledge what you don't know, says Nobel economist
Complexity of economic problems sometimes calls for simple solutions, argues Nobel laureate
Policymakers and business leaders need to embrace the unknown if they want to make better decisions, and not be afraid of publicly saying, "I don't know", Nobel economics laureate Lars Peter Hansen said.
"For some reason we can't have public discussions where people say, 'Well, here is my best guess, and here is the range I am uncertain about'," said Hansen, a University of Chicago professor.
Public thinking isn’t mature enough to handle the uncertainty component
"Somehow our public thinking isn't mature enough to handle the uncertainty component."
The public is easily swayed by the economists and policymakers who project the greatest confidence, he said. He complained that some economists prematurely rush to promote their ideas through the media.
Hansen wants to see theories and models subjected to greater academic scrutiny before being adopted by decision makers.
In recent years, models have come under increased review as supposedly once-in-a-century events, be they financial, meteorological or seismic, happened with irregular regularity.