Risk, Choice, and Uncertainty

Three Centuries of Economic Decision-Making

George G. Szpiro

Columbia University Press

Risk, Choice, and Uncertainty

Pub Date: January 2020

ISBN: 9780231194747

264 Pages

Format: Hardcover

List Price: $32.00£28.00

Pub Date: January 2020

ISBN: 9780231550970

264 Pages

Format: E-book

List Price: $31.99£28.00

Risk, Choice, and Uncertainty

Three Centuries of Economic Decision-Making

George G. Szpiro

Columbia University Press

At its core, economics is about making decisions. In the history of economic thought, great intellectual prowess has been exerted toward devising exquisite theories of optimal decision making in situations of constraint, risk, and scarcity. Yet not all of our choices are purely logical, and so there is a longstanding tension between those emphasizing the rational and irrational sides of human behavior. One strand develops formal models of rational utility maximizing while the other draws on what behavioral science has shown about our tendency to act irrationally.

In Risk, Choice, and Uncertainty, George G. Szpiro offers a new narrative of the three-century history of the study of decision making, tracing how crucial ideas have evolved and telling the stories of the thinkers who shaped the field. Szpiro examines economics from the early days of theories spun from anecdotal evidence to the rise of a discipline built around elegant mathematics through the past half century’s interest in describing how people actually behave. Considering the work of Locke, Bentham, Jevons, Walras, Friedman, Tversky and Kahneman, Thaler, and a range of other thinkers, he sheds light on the vast scope of discovery since Bernoulli first proposed a solution to the St. Petersburg Paradox. Presenting fundamental mathematical theories in easy-to-understand language, Risk, Choice, and Uncertainty is a revelatory history for readers seeking to grasp the grand sweep of economic thought.
In Risk, Choice, and Uncertainty, George Szpiro presents a remarkably readable, nonmathematical account of the theory of choice between risky alternatives. Harry Markowitz, winner of the 1990 Nobel Prize in Economic Sciences
Risk, Choice, and Uncertainty is a masterpiece of intellectual biography. In his best book to date, Szpiro’s wit and stylish writing make the history of thinking about thinking both intriguing and accessible. Sylvia Nasar, author of Grand Pursuit: The Story of Economic Genius
Economic theory treats humans as "utility maximizers". But what is "utility"? 300 years ago, Daniel Bernoulli declared it as relative gain in wealth. Later it became an abstract scale for consistent preferences, but this postulated "rationality" has its own paradoxes and controversies as concerns actual behavior. George Szpiro's sweeping historical tour de force of this topic entertains, informs and delights. Bernhard von Stengel, Professor of Mathematics, game theorist, London School of Economics and Political Science
Risk, Choice, and Uncertainty is a well-organized and pleasantly written account of the history of economics seen through the lens of individual decision making, ranging from expected utility to prospect theory. It will be of interest to a lay audience and curious students alike. Maria Pia Paganelli, Trinity University
Introduction
Part I. Happiness and the Utility of Wealth
1. It All Began with A Paradox
2. More Is Better . . .
3. . . . at a Decreasing Rate
Part II. Mathematics Is the Queen of the Sciences . . .
4. The Marginalist Triumvirate
5. Forgotten Precursors
6. Betting on One’s Belief
7. Games Economists Play
8. Wobbly Curves
9. Comparing the Incomparable
Part III. . . . But Man Is the Measure of All Things
10. More Paradoxes
11. Good Enough
12. Sunk Costs, the Gambler’s Fallacy, and Other Errors
13. Erroneous, Irrational, or Plain Dumb?
Notes
Bibliography
Index

About the Author

George G. Szpiro is an award-winning author and journalist. A longtime correspondent for the Swiss daily Neue Zürcher Zeitung, his many books include Numbers Rule: The Vexing Mathematics of Democracy, from Plato to the Present (2010) and Pricing the Future: Finance, Physics, and the 300-Year Journey to the Black-Scholes Equation (2011).