Subjective Truths

Aurelien Baillon ()

ERIM Inaugural Address Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.

Abstract: __Abstract__ On the one hand, economists heavily rely on hard numbers: GDP, growth rate, and exchange rates. On the other hand, their explanations often rely on soft factors: executive confidence in the economy, consumer sentiment, and investor expectations. The hard numbers are objective, but the soft factors are subjective and depend on each individual. Economists increasingly recognize the need to study subjective factors. The first part of the lecture illustrates the key role of subjective truths in modern economics. For instance, measures of subjective well-being are now being proposed to replace or at least complement GDP. Economic policies often rely on subjective forecasting by experts. The second part of the lecture will show that even though they are subjective, the soft factors can still be studied objectively. We will see how to incentivize people to reveal their expectations about future events but also their confidence in their expectations. Finally, I will show how to make people reveal truths that are completely unverifiable.

Keywords: expectations; subjective well-being; confidence; ambiguity; uncertainty; measurement; prediction markets (search for similar items in EconPapers)
JEL-codes: C44 C88 D03 D7 D81 D84 J17 M31 (search for similar items in EconPapers)
Pages: 38
Date: 2015-05-22
New Economics Papers: this item is included in nep-hap and nep-hpe
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