8 Uncertainty and macroeconomic methodology
Sheila Dow
Introduction
The most direct way in which uncertainty features in macroeconomics relates to expectations; the greater the uncertainty about the reliability of expectations the less confidence in them, with consequences for the behaviour underpinning macroeconomic aggregates. But uncertainty is understood and represented differently according to macroeconomic approach, most notably according to whether or not it is judged that uncertainty can be represented by the variance of a frequency distribution. While conflating uncertainty with quantifiable risk in this way has been the traditional mainstream approach to uncertainty, it has been modified to encompass ...
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