Inaugural Address: Subjective Truths
On the one hand, economists heavily rely on hard numbers: GDP, growth rate, and exchange rates. On the other hand, their explanations often rely on soft factors: executive confidence in the economy, consumer sentiment, and investor expectations. The hard numbers are objective, but the soft factors are subjective and depend on each individual. Economists increasingly recognize the need to study subjective factors.
The first part of the lecture illustrates the key role of subjective truths in modern economics. For instance, measures of subjective well-being are now being proposed to replace or at least complement GDP. Economic policies often rely on subjective forecasting by experts. The second part of the lecture will show that even though they are subjective, the soft factors can still be studied objectively. We will see how to incentivize people to reveal their expectations about future events but also their confidence in their expectations. Finally, I will show how to make people reveal truths that are completely unverifiable.
Aurelien Baillon is Professor of Economics of Uncertainty, in the Behavioral Economics group. He studied economics and management at Ecole Normale Superieure de Cachan and has a Ph.D. in economics from Arts et Metiers Paristech. Aurelien's work focuses on individual decision making under risk and ambiguity. Through both empirical and theoretical studies, his research addresses issues in subjective probability elicitation, models of attitude towards risk and ambiguity, and aggregation of expert opinions.
Photos: Chris Gorzeman / Capital Images