Saturday, May 23, 2009

How Do You Feel About the Recession?

Liam asked recently: why do recessions feel bad?

He mentioned fear of the future, sadness due to the loss of posessions, and anger. In a recent blog-post, Derek Bownds suggests that money doesn't make us happy, certainty does (based on an Op-Ed piece from Daniel Gilbert in the N.Y. Times). Hence, uncertainty aversion?


Kevin Denny said...

Whats the difference between uncertainty aversion & risk aversion?

Liam Delaney said...

I havent had time to read this but I assume that this is the distinction between risk and ambiguity. Like in the Ellsberg paradox, people seem to prefer and option where they know the actual risks than one with an equivalent expected value where the distribution of outcomes is ambiguous.