Given our inevitably incomplete knowledge about key…
“Given our inevitably incomplete knowledge about key structural aspects of an everchanging economy and the sometimes asymmetric costs or benefits of particular outcomes, a central bank needs to consider not only the most likely future path for the economy but also the distribution of possible outcomes about that path. The decision makers then need to reach judgment about the probabilities, costs and benefits of the various possible outcomes under alternative choices for policy.”
About This Quote
This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation.
Policymakers must evaluate both likely economic futures and the range of possible outcomes, weighing probabilities and trade‑offs.
In simple terms: Consider many possible futures, not just the most likely.
Key Takeaway
Use scenario analysis for robust policy.
Themes
economics
policy
uncertainty
risk assessment
Mood
analytical
cautious
Type
technical
analytical
When to use this quote
- central banking
- investment decisions
- regulatory design
Key Concepts
probability theory
cost‑benefit analysis
scenario planning
Questions to Reflect On
- How can we better model asymmetric outcomes?
- What tools improve judgment under uncertainty?