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Random distributions are not good things, because people…

“Random distributions are not good things, because people are risk-averse, and this risk adversely affects their welfare. If you get too much price uncertainty, all kinds of long-term, mutually beneficial contracts can't be entered into.” quote by Edward C. Prescott
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“Random distributions are not good things, because people are risk-averse, and this risk adversely affects their welfare. If you get too much price uncertainty, all kinds of long-term, mutually beneficial contracts can't be entered into.”

Edward C. Prescott

About This Quote

This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation.

High price uncertainty discourages long‑term contracts, harming welfare for risk‑averse societies.

In simple terms: Risk aversion limits beneficial agreements.

Key Takeaway

Mitigate uncertainty to improve welfare.

Themes

economics risk policy

Mood

analytical concerned

Type

academic policy‑oriented

When to use this quote

  • Insurance design
  • government regulation
  • market design

Key Concepts

Contract theory uncertainty welfare economics

Questions to Reflect On

  • How can policy reduce price uncertainty?
  • What mechanisms encourage long‑term contracts?
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