Many economic decisions involve a guess about the future: people’s decisions about purchasing houses or big-ticket items; companies’ choices about when and where to build new factories, whether to invest in capital equipment and how many workers to hire; and governments’ choices about spending and tax policies, among others. Uncertainty about the future can cause these transactions to be deferred or foregone. Thus, an understanding of uncertainty is important for an understanding of many economic outcomes. What are different types of uncertainty? How can uncertainty be measured? Are there times when uncertainty is ... (full story)