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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.” 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

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.

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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