UNCERTAINTY IN ECONOMICS
The title of this chapter was given to me by the editors of this volume. Whether they intended it or not, it is open to two interpretations: the treatment of uncertainty within economics, or the present uncertainty within the profession as to the appropriate treatment of uncertainty in economics. I shall interpret it in both ways. The schizophrenic nature of the title accurately reflects the present schizophrenic attitude towards the treatment of uncertainty by the profession: on the one hand, most economists applying uncertainty theory use subjective expected utility theory (SEUT) as their starting point (numerous examples can be found elsewhere in this volume); on the other hand, many economists studying uncertainty theory itself are increasingly turning away from SEUT as a valid starting point, largely because empirical evidence (usually of an experimental nature-see Chapter 29) casts doubt on the basic axioms of SEUT. I shall refer to SEUT as the ‘conventional wisdom’, and shall begin by discussing it, before moving on to the exciting new developments stimulated by the empirical evidence referred to above.