Pissarro and Bernoulli

From Amid Great Uncertainty by Brooke O'Neill.

Economist Lars Peter Hansen confronts—and quantifies—the unknowns of market behavior.

In 1898, Impressionist Camille Pissarro peered out his hotel window in Rouen, France, and discovered his newest subject. “I found an excellent place from which I can paint the Rue del’Épicerie and even the market, a really interesting one, which is held there every Friday,” he wrote to his son. Depicting an elaborate dance of bargaining and buying, hawking and haggling, his rendering has long been admired for its reflection of contemporary life.

Economist Lars Peter Hansen sees something else: uncertainty.

“When vendors come to that market, they don’t know how much demand there will be for their goods,” says Hansen, the David Rockefeller Distinguished Service Professor in Economics, Statistics & the College. “They can make guesses. They can use previous experiences. But they really don’t know exactly.”

Hansen has made a career of investigating the dynamics of not knowing—and creating powerful statistical tools that help estimate how decision-makers act amid uncertainty. Winner of the 2013 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for his work on asset pricing, he sums up his approach with one sentence: “You can do something without having to do everything.”

This is what originally caught my eye. The juxtaposition of the cognitive pursuit of knowledge (portrait of Jacob Bernoulli) about a complex system (the marketplace.)

One of Hansen’s favorite lecture slides splices together Pissarro’s busy market — buyers and sellers full of uncertainty — with a portrait of famed 17th-century Swiss statistician Jacob Bernoulli assessing the drama.

Click to enlarge.