Risk, Choice, and Uncertainty: Three Centuries of Economic Decision-Making

October 31, 2020
Risk, Choice, and Uncertainty: Three Centuries of Economic Decision-Making

At its core, economics is about making decisions. In the historyof economic thought, great intellectual prowess has been exertedtoward devising exquisite theories of optimal decision making insituations of constraint, risk, and scarcity. Yet not all of ourchoices are purely logical, and so there is a longstanding tensionbetween those emphasizing the rational and irrational sides ofhuman behavior. One strand develops formal models of rationalutility maximizing while the other draws on what behavioral sciencehas shown about our tendency to act irrationally.In Risk, Choice, and Uncertainty, George G. Szpiro offers a newnarrative of the three-century history of the study of decisionmaking, tracing how crucial ideas have evolved and telling thestories of the thinkers who shaped the field. Szpiro examineseconomics from the early days of theories spun from anecdotalevidence to the rise of a discipline built around elegantmathematics through the past half century’s interest in describinghow people actually behave. Considering the work of Locke, Bentham,Jevons, Walras, Friedman, Tversky and Kahneman, Thaler, and a rangeof other thinkers, he sheds light on the vast scope of discoverysince Bernoulli first proposed a solution to the St. PetersburgParadox. Presenting fundamental mathematical theories ineasy-to-understand language, Risk, Choice, and Uncertainty is arevelatory history for readers seeking to grasp the grand sweep ofeconomic thought.