Interview with 2013 Nobel Laureate in Economics
2019-08-21 09:37:04
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As a leading expert in economic dynamics, 2013 Nobel Laureate Lars Peter Hansen works at the forefront of economic thinking and modeling, drawing approaches from macroeconomics, finance, and statistics. His recent work focuses on uncertainty and its relationship to long-run risks in the macroeconomy. In an interview after his keynote speech at the Second China International Conference in Macroeconomics (CICM) , Hansen shared his insights into interdisciplinary work, education and uncertainties.

PHBS reporter Annie Jin interviews Nobel Laureate Hansen in the PHBS Future Media Lab, which is equipped with an advanced video studio, and provides a professional platform for financial news teaching, research and practice

Q: As interdisciplinary research has gained much momentum, bio-economics, information economics and behavioral economics are emerging. What do you think about this trend in economics?

Hansen: I think there are lots of potentially valuable interactions across different disciplines. That depends a lot on what type of problems you want to work on. At least part of my interests have been related to climate economics. You can't really get anywhere without at least getting some connections to people doing climate science from a scientific perspective. I'm no expert in geophysics, and therefore, I have to rely on others to try to figure out how to use insights from that field, to bring them inside economics. Because I don't see how we can do economics and climate change without understanding them. I've often found value in looking at statistics in general. There are lots of statistical tools and methods, all the way from decision theory to more statistical inferential questions that I get lots of benefit from.

Environments are highly complex, so we're putting individuals in a complex set of circumstances. They have to try to figure out guesses and figure out what's going on. So, different ideas from information theory and different ideas from statistics help us think about environmental complexity. Psychology interacting with that can also be of interest. However, interdisciplinary work is very hard, because you have to at least work with people in other areas. Different fields have different priorities,and different conventions, so really doing this in a serious way is not easy. I think when it's done well, it can be very, very valuable. But often it's done in very superficial ways that I think are not so helpful. So the real challenge is how to do this well. And when it's done well, new insights can really emerge. 

Q: You once quoted Mark Twain, “Education: the path from cocky ignorance to miserable uncertainty.” What role can our education system play in face of uncertainties today?

Hansen: I guess the challenge here is to make the uncertainty in some sense less miserable. We have to live with uncertainty. Uncertainty is there. It is inescapable. I think we're better off acknowledging it, and figuring out sensible ways to confront it, rather than pretending it doesn't exist. For instance, in the country that I come from, the politicians are very concerned about what the public thinks. They oftentimes pretend to have more knowledge than they really do to try to impress people. Sometimes economic advisors are going to say, “Here's what you should do,” with great confidence. And it's kind of false confidence often. It's not really based on fundamental knowledge.

So understanding the incompleteness of our knowledge, but more importantly how to address it in ways that are constructive, is an important challenge. Part of that is educating the public itself to have more realistic expectations. And there are still constructive things we can do even in an environment with limited knowledge. Education is very important to make people think about this in less superficial ways. Courses from probability to decision making to statistics, all of those, can help to contribute to this.