Economics of Pessimism and Optimism

This book was awarded the 61st Nikkei Prize for Excellent Books in Economic Science 2018 by The Japan Center for Economic Research To summarize, this book, jointly written by the two prominent economists Nishimura and Ozaki, is no doubt a monumental achievement on the economics of ambiguity and uncertainty. It is well organized and mathematically sophisticated. It is expected to be read by two types of readers: highly mathematically trained researchers and general theoretical scholars with less technical orientation. I believe that application-oriented researchers and policy-makers may also benefit from careful reading of such a first-rate work. (Yasuhiro Sakai, Journal of Economic Psychology, Vol. 72, June, 2019) The recent monograph by Nishimura and Ozaki, entitled Economics of Pessimism and Optimism: Theory of Knightian Uncertainty and Its Applications, provides a summary of this exciting new research. Despitebeing limited to the CEU/MEU formulation of Knightian Uncertainty, the recent monograph by Nishimura and Ozaki is an ideal resource for those looking to catch up to the current research frontier on Knightian Uncertainty. It is well written and well organized. (Ken Kasa, International Finance, February, 15, 2019) Kiyohiko Nishimura and Hiroyuki Ozaki have produced a thorough, scholarly, and mathematical rigorous treatment of decision theory when the probability distribution governing uncertainty is unknown . Nishimura and Ozaki are to be congratulated on their thorough and innovative treatment of how to use convex Choquet capacities to make fundamental uncertainty operational, under certain assumptions. Their book will be indispensable to, and warmly welcomed by, technically oriented researchers in decision theory. (Robert W. Dimand, Journal of Economics, Vol. 124, 2018)

Kiyohiko G. NishimuraKiyohiko G. Nishimura is emeritus professor of economics and distinguished project research fellow at The University of Tokyo and a professor of economics in the National Graduate Institute for Public Policy (GRIPS). Before returning to academia, he was deputy governor of the Bank of Japan for 5 years until March 19, 2013, one of the most turbulent periods in the history of the world economy and central banking. He received his B.A. (1975) and M.A. (1977) from The University of Tokyo and his Ph.D. (1982) from Yale University. He was associate professor (19831994) and professor (19942005). He joined the Bank of Japan as a Member of its Policy Board (20052008), and then as deputy governor (20082013). He was dean of the Graduate School of Economics at The University of Tokyo (20132015). Since February 2014, he has been chairman of the Statistics Commission of the Government of Japan.He received the Nikkei Prize in 1993, the Japan Economist Prize in 1997, and the TELECOM Social Science Award in 2006. He was also the winner of the Japanese Economic Association Nakahara Prize in 1998 for his outstanding international contribution to mathematical economics and economic theory. He was awarded Emperor s Medal of Honor with Purple Ribbon in 2015 for his outstanding contribution to theoretical economics. Hiroyuki Ozaki Hiroyuki Ozaki is professor of economics at Keio University. He has been particularly active in developing the theory of dynamic decision making, where non-additive probability measures are used, with applications to elucidation of macroeconomic phenomena that are hard to explain in the traditional additive probability framework. He received his B.A. (1986) from Keio University and his Ph.D. (1992) from The University of Wisconsin at Madison, where he majored in economics and minored in mathematics. He was assistant professor at The University of Western Ontario (19931996) and associate professor at Tohoku University (19962005) before joining the Faculty of Economics at Keio University in 2005. He has been professor at Keio University since then. Dr. Ozakis academic research focuses on mathematical economics and the decision-theoretic foundation of economic agents behavior. Among his numerous contributions to this field, most notable is: "Dynamic programming for non-additive stochastic objectives," Journal of Mathematical Economics 25 (1996), 391442 (with Peter A. Streufert), which developed powerful tool kits for dynamic analyses that can be available in a very general economic environment.

1 Overall Introduction.- 2 Mathematics for Reading Later Chapters.- 3 Decision-Theoretic Foundations of Knightian Uncertainty.- 4 Portfolio Inertia.- 5 Equilibrium Indeterminacy in Arrow-Debreu Economy with Knightian Uncertainty.- 6 Monetary Equilibria and Knightian Uncertainty.- 7 Dynamic Programming.- 8 Dynamic Asset Pricing.- 9 Search and Knightian Uncertainty.- 10 Irreversible Investment and Knightian Uncertainty.- 11 Liquidity Preference and Knightian Uncertainty.- 12 A Simple Characterization of Pessimism and Optimism: e-Contamination Versus e-Exuberance.- 13 Persistent Pessimism and Optimism in Forecasts: Implicit Means and Law of Iterated Integrals.- 14 Learning Under Knightian Uncertainty.- 15 Areas of Further Research.- Appendix Proofs of Lemmas and Theorems.- Index.