Knightian Uncertainty
The Birth of Behavioral Finance.

Jottings for my forthcoming book on Knightian uncertainty.

Finance had not interested Herbert Simon and the other “old” behavioral economists. It also did not feature prominently in the work of Kahneman and Tversky’s who pioneered the new, and more successful behavioral economics. But other new behavioral stars, such as Andrei Shleifer who won the John Bates Clark medal in 1999, focused on finance.
In July 1991, Yale’s Robert Shiller and Cornell’s Richard Thaler[i]) (who would win economics Nobels in 2013 and 2017 respectively), organized the first NEBR-sponsored Workshop in Behavioral Finance. The workshops held twice a year attracted a few but highly engaged participants. Some like Shleifer were rising stars in mainstream finance and economics and the papers they presented at the workshops were often then published in top-tier journals.
A wide-eyed outsider to this community I attended regularly; Shiller even asked me to discuss a paper in the July 1994 workshop.[ii])

 


[i] In 1995, Thaler moved to the University of Chicago’s business school.

[ii] The list of workshops is posted (as of December 4, 2022 at http://www.econ.yale.edu/~shiller/behfin/. Frustratingly the only workshop not detailed at the link is the one held on July 1994.  But I did find Shiller’s letter to me and which I have posted above.

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