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Arrow: Crisis a Challenge to Standard Economic Theory

Posted on October 15, 2008

Kenneth Arrow:Risky business, by Kenneth Arrow: The current financial crisis ... presents ... a challenge to standard economic theory, a challenge all the more important since the development of policies to prevent future financial crises will depend on a deeper understanding of the processes at work.That economic decisions are made without certain knowledge of the consequences is pretty self-evident. But, although many economists were aware of this elementary fact, there was no systematic analysis of economic uncertainty until about 1950. There have been two developments in the economic theor...

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