Choice under Uncertainty: Problems Solved and Unsolved

Fifteen years ago, the theory of choice under uncertainty could be considered one of the ‘success stories’ of economic analysis: it rested on solid axiomatic foundations, it had seen important breakthroughs in the analytics of risk, risk aversion and their applications to economic issues, and it stood ready to provide the theoretical underpinnings for the newly emerging ‘information revolution’ in economics.1 Today choice under uncertainty is a field in flux: the standard theory is being challenged on several grounds from both within and outside economics. The nature of these challenges, and of economists’ responses to them, is the topic of this chapter.