One of the UK’s leading economists will be discussing the knock-on effects of decision-making in economic markets and how people make them in a lecture tomorrow at Cambridge University’s Faculty of Law.

Professor Charles Goodhart, CBE, FBA, an expert on monetary policy and financial stability, will be delivering the second in a series of biennial lectures held in memory of the economic theorist Professor GLS Shackle.

His talk will cover certain aspects of Shackle’s interest in the role of decision-making in economics, examining in particular Shackle’s challenges to rational choice theory.

Rational choice theory is the dominant model of decision making in many disciplines, including economics. It assumes that individuals make the best choice according to certain preferences and constraints, which remain the same over a period of time.

Shackle’s criticisms focused on the unlikelihood of people being able to accurately gauge the chances of a desired outcome and the problems of unexpected events.

Professor Goodhart will look at some of the recent work from scholars in the US, who have examined how people make decisions in practice and whose conclusions have, in many respects, been anticipated by Shackle decades earlier.

But he will also consider some of the ways in which Shackle’s alternative model could be revised, specifically by considering how people avoid making decisions, by making the same choices that other people have taken and by following the advice of experts.

Professor Goodhart is a member and former Deputy Director of the Financial Markets Group at LSE, where for 17 years he was Norman Sosnow Professor of Banking and Finance.

In addition to his role at the LSE, Goodhart has worked at the Bank of England as a monetary adviser. In 1997 he was appointed one of the outside independent members of the Bank’s new Monetary Policy Committee. He has written books on monetary history, policy and on financial stability as well as numerous articles.

His lecture will also form a tribute to the late Professor Stephen Frowen KSG, a long-time lecturer at Surrey University and a Fellow Commoner at St Edmund’s College who died in December last year. Professor Frowen was instrumental in setting up the memorial lectures for Shackle, a life-long friend of his.

Professor Goodhart’s lecture, Risk, uncertainty, and financial stability, is free and open to all. It will take place at 5.00pm on Thursday 6 March in room LG19 at the Faculty of Law, on the Sidgwick Site. A reception will be held following the lecture and refreshments will be provided.

Booklets containing a printed version of the lecture, and tributes and obituaries for Professor Frowen will be available at the lecture.

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