20. Uncertainty

MIT 14.01 Principles of Microeconomics, Fall 2018
Instructor: Prof. Jonathan Gruber

This video explains the economic concept of decision making under uncertainty.

License: Creative Commons BY-NC-SA

[Dr_Tanvi_Sinha]

What a glorious lecture. Historic. I've listened to this on flights a hundred million times and yet learn something new with each view. What a beauty economics is 😊

[yashchugh]

@34:38 shouldn't the cost be 398 since at a cost of 399 the 25 yr old male would just be indifferent between the choices, but at 398 his E(u) would be better if he's insured?
Phenomenal work th0 MIT ❤️

[economicclasses]

Watching from kashmir in 2020 at 2g speed in 21 century

[VictoriaLaRocque]

I do not get the idea of splitting one month's insurance if a risk of getting hit by car is not evaluated per month too. Otherwise, you should calculate 40 000 x times you get your salary under the period that the risk of 0, 01 is for, which is probably the whole life, so that gives a tiny sum of some dollars per month, far below 399

[Cam-lhnr]

I think that you neglect to consider the addictive property of gambling. Much like smoking. Everyone is not ignorant, entertainment is certainly coming close, but addiction seems to me the most plausible explanation, especially when I consider the types of regular lottery participants you mention.

[groenewilde]

I loved the lecture, but I do have 1 short question; all of the examples used have probability values, which is calculated risk, not Knightian uncertainty. How do we deal with that in economics?

[vanessaverner]

I am taking an online class. Some teachers to not post an online lecture. Thank You,

[Risk_and_Reward_Youtube]

I understood the first 5 minutes, and then my expected utility went to 0

[yatisri]

From where is 125$?? Is that mentioned on the question?

[MachaSavageBunny]

Sometimes it made me think that the teachers are so smart they made me wonder, becaus they're so on the topic, like they can be on a topic for a very long time.😂

[giles]

Hi guys. Hopefully someone can help clarify something here. At around 9:05 he says that the Expected Utility is less than the Initial utility, but surely that is based on his given utility function. Isn't that utility function just like a cost function, it could be anything, he's just plucked that function out of the air? Or is that specific equation something that needs to be remembered.

[susieroberts]

Why is the function 'concave'? Looks convex to me ...

[purple_hyacinth]

At 23:52, why is the utility root 112.5?