By David Brancaccio
This morning in Stockholm, Sweden, three American men will be awarded the Nobel Prize in Economics. Yale’s Robert Shiller and the University of Chicago’s Eugene Fama and Lars Peter Hansen are being recognized for their at times conflicting research into how financial markets work.
Before he departed, Marketplace Morning Report host David Brancaccio spoke with Lars Peter Hansen…
…David Brancaccio: One example that comes to mind is we know a lot about climate change, but there’s also a lot we don’t know. What do you think your way of thinking about imperfect models would mean for making good decisions about an issue like that?
Lars Peter Hansen: So that’s a fascinating question. And this shows up not only in connections to economics and the climate, it also shows up in financial oversight and regulation. Early on, in discussions of financial oversight, people would say, ‘Well, this is a very complicated problem, therefore it requires a complicated solution.’ And at that step, I would say, ‘Well, wait a minute. Just because it’s a complicated problem doesn’t mean the best course of action immediately is one that’s complicated.’ Because, you know, behind complexity you can slip indiscretion, you can slip in counterproductive measures that overstate our knowledge and the like. And an advantage of a more simpler approach is transparency as well…
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