Customer Quote by Edward C. Prescott
“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.”
About This Quote
Source Academic Paper: “Risk and Welfare”, 1995
High price uncertainty discourages long‑term contracts, harming welfare for risk‑averse societies.
In simple terms: Risk aversion limits beneficial agreements.
Mitigate uncertainty to improve welfare.
Themes
Mood
Type
When to use this quote
- Insurance design
- government regulation
- market design
Key Concepts
Questions to Reflect On
- How can policy reduce price uncertainty?
- What mechanisms encourage long‑term contracts?