The Economics of Uncertainty Series

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24 episodes in this series

Episode 1 Man, Nature, and Economic Uncertainty
Professor Fullenkamp begins with "black swan" events--occurrences that are considered as improbable as black swans. A notable recent example is the 2008 financial crisis. This leads to an examination of…
Episode 2 Turning Uncertainty into Risk
When faced with an uncertain situation, try turning it into a "risky" situation. Risk is probability. Knowledge is power. This may sound counterintuitive, but it's a surprisingly effective approach, pioneered…
Episode 3 Five Ways to Face the Unknown
In dealing with uncertainty, it makes sense to have an arsenal of different strategies. Explore five techniques for risk management that can be used in every sphere of life: producing…
Episode 4 Probability: Frequency or Belief?
Examine two different types of probability. Frequency-based probabilities rely on many examples of a phenomenon, while subjective probabilities call on personal experience and judgment, often drawing on relatively few cases.…
Episode 5 How We Misjudge Likelihood and Risk
Improve your ability to handle uncertainty by studying two ways that people reach decisions. System 1 excels at making snap judgments, while System 2 is analytical, methodical, and more time-consuming.…
Episode 6 The Reward in Risk
Having learned to convert uncertainty to risk in Lecture 2, now go deeper by investigating how probabilities can gauge rewards and risks. Test risk-assessing tools used in finance, including expected…
Episode 7 Decision Science Tools
When is a risky project worth doing? Learn how corporate managers decide whether they should undertake a new enterprise. Discover that simple graphic aids, such as scenario analysis and decision…
Episode 8 Gambling Economics
Gambling makes some people nervous, but it gives valuable insight into any type of risk-taking activity, including investing and entrepreneurship. Explore the role of games of skill and chance in…
Episode 9 Game Theory: Reveal or Conceal?
Use game theory to shed light on strategic interactions, which are competitive transactions involving people or organizations. Such interactions can range from negotiating the sale of a house to pricing…
Episode 10 Adverse Selection: Hiding in Plain Sight
Adverse selection occurs when the lack of information by one party leads to a distorted result. See how this situation surfaces in many different contexts, from used car sales to…
Episode 11 Moral Hazard: Whom Do You Trust?
Examine another outcome of asymmetric information: the moral hazard problem. This peril arose spectacularly in the 2008 financial crisis, with the widespread sale of bad loans to unwitting investors. But…
Episode 12 The Principal-Agent Problem: When Mice Play
Focus on a special case of moral hazard: the principal-agent problem, in which an agent is appointed to handle a matter beyond the expertise of the person doing the hiring…
Episode 13 Compensation Traps
Delve into the uncertain realm of compensation contracts, which ideally motivate employees to do a good job, but too often have unintended consequences. Survey the pluses and minuses of efficiency…
Episode 14 Caring, Sharing, and Risk Bearing
Altruism is more complicated than simple selflessness. Instead, it may be the world's oldest and most effective risk-sharing system. Discover the power of viewing altruism as economists do--as a mathematical…
Episode 15 Mayhem! Insurance Protection
Investigate the multitude of ways you can insure against misfortune, from extended warranties to travel insurance to identity-theft protection--not to mention health, car, home, and life insurance. Learn how insurance…
Episode 16 Uncertainty in the Numbers
Statistics are essential tools for dealing with uncertainty, but they should be used with caution. Put numbers such as the unemployment rate and consumer price index into context, probing how…
Episode 17 The Business Cycle’s Wheel of Fortune
Nothing is as certain and yet so unpredictable as the business cycle; economic expansion is invariably followed by a recession--and vice versa--but economists are at a loss to forecast the…
Episode 18 The Danger of Inflation
Even in times of low inflation, no one knows when prices will take off again. Look into the causes of inflation, efforts to control it, and the surprising wisdom of…
Episode 19 Extreme Markets
At any given moment, some market somewhere is making headlines because it's either hitting record highs or crashing down to earth. Learn how to approach the uncertainty of financial markets…
Episode 20 Regulation, Innovation, Excess
Government policies are a major source of uncertainty, since they can alter our lives in unpredictable ways. Study the surprising outcomes from several government interventions in the U.S. economy. In…
Episode 21 Global Trade in Employment
Free trade produces uncertainty and anxiety in economic players at all levels. Understand how comparative advantage governs who benefits in the competition for international trade. Then hear Professor Fullenkamp's tips…
Episode 22 No Limits to Growth
Look at possible catastrophes that are decades away: alarming trends such as overpopulation, scarcity of raw materials, and environmental degradation. Observe that society has so far escaped the worst predictions…
Episode 23 Hedging Business and Personal Risks
Examine tools that professionals use to hedge against financial risk, such as forward contracts and financial options. Study the suitability of these instruments for individuals. Then probe a more flexible…
Episode 24 Stress Testing Your Finances
Close by learning how to take the economic "stress test," inspired by bank evaluations made in the wake of the 2008 financial crisis. This simple exercise helps you anticipate the…

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