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Risk, Ambiguity and Daniel Ellsberg

Summary:
The death of Daniel Ellsberg on Friday reminded me of his contribution to economics and his influence on my own thinking. In 1987, I was at Cornell, beginning an abortive PhD candidacy. In one of my courses there was an assigned reading on decision theory by Leonard Savage. One of the footnotes referred to an article by “Daniel Ellsberg” and I naturally wondered if it was the same Daniel Ellsberg of Pentagon Papers fame. “Risk, Ambiguity and the Savage Axioms” was indeed by the same Daniel Ellsberg. It also happened that a copy of his PhD dissertation was available at the Catherwood ILR library, which I read eagerly. Ellsbergian ambiguity is very similar to Keynesian uncertainty with the important distinction that Ellsberg performed experiments,

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The death of Daniel Ellsberg on Friday reminded me of his contribution to economics and his influence on my own thinking. In 1987, I was at Cornell, beginning an abortive PhD candidacy. In one of my courses there was an assigned reading on decision theory by Leonard Savage. One of the footnotes referred to an article by “Daniel Ellsberg” and I naturally wondered if it was the same Daniel Ellsberg of Pentagon Papers fame. “Risk, Ambiguity and the Savage Axioms” was indeed by the same Daniel Ellsberg. It also happened that a copy of his PhD dissertation was available at the Catherwood ILR library, which I read eagerly.

Ellsbergian ambiguity is very similar to Keynesian uncertainty with the important distinction that Ellsberg performed experiments, enlisting the leading decision theorists of the day, to demonstrate that these cheerleaders for rational decision making readily abandoned rational choice when faced with an ambiguous choice. I will only mention the beauty and sheer brilliance of his demonstration, if you want to experience it you will have to read it yourself. I can’t do it justice in describing it. When you read Ellsberg’s article and his dissertation, it becomes clear that his writing of the Pentagon Papers, as well as his public disclosure of it were deeply theoretically grounded. Ellsberg documented the persistent and pernicious irrationality of U.S. government officials and institutions when confronted with an ambiguous problem.

My own thought and research has been deeply influenced by Ellsberg’s work on ambiguity, which makes me somewhat of an anomaly. In the past few years I have focused on Karl Marx’s Grundrisse with a rather unconventional interpretation. A large part of that unconventionality is that I perceive ambiguity and ambivalence where Marx’s followers — and perhaps Marx himself — sought certainty.

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