The Arnold A. Saltzman Institute of War and Peace Studies presents:

“Risk, Uncertainty and the Financial Crisis of 2008”

with Stephen C Nelson
Assistant Professor, Department of Political Science, Northwestern University
and Peter J. Katzenstein
Walter S. Carpenter, Jr. Professor of International Studies, Cornell University

moderated by Jack Snyder
Robert and Renée Belfer Professor of International Relations, Department of Political Science
Member, SIWPS


The talk is based on an upcoming article in the journal International Organization.

The distinction between uncertainty and risk, originally drawn by Frank Knight and John Maynard Keynes in the 1920s, remains of fundamental importance today. In the first part of the article the authors explain the origins of the concept of uncertainty and how it was criticized and subsequently evolved into a single, dominant model of decision making upon which the dominant risk-based theories of finance and economic policymaking were subsequently built. They argue instead that in the presence of uncertainty market actors and economic policymakers substitute other methods of decision making for rational calculation; specifically, actors’ decisions are rooted in social conventions. The second half of the article provides illustrative evidence, drawn from innovations in financial markets and deliberations among top American monetary authorities in the years before the crisis. The evidence is substantial enough to support the article’s central claim: economic actors and policymakers live in worlds of risk and uncertainty. And in that world social conventions deserve much greater attention than conventional IPE analyses accords them. Such conventions, they conclude, must be part of our toolkit as we seek to understand the preferences and strategies of economic and political actors.


Stephen C. Nelson is an assistant professor in the Department of Political Science at Northwestern University. His research and teaching interests lie in the study of international political economy. Within that broad domain his most recent projects involve studying the behavior of international institutions (specifically, the International Monetary Fund), the consequences of compliance with international legal agreements, and how economic agents and policymakers cope with risk and uncertainty. He is a member of the International Organizations & International Law Working Group housed at the Roberta Buffett Center for International and Comparative Studies.

He completed his undergraduate degree in political science at Carleton College in 2002. In August 2009 he received a PhD from Cornell University’s Government Department.

Peter J. Katzenstein’s research and teaching interests lie at the intersection of the fields of international relations and comparative politics. His work addresses issues of political economy, security and culture in world politics. His current research interests focus on the politics of civilizations; on questions of public diplomacy, law, religion, and popular culture; regionalism in world politics; and German politics. Recent books include: Anglo-America and Its Discontents: Civilizational Identities beyond West and East (Routledge, 2012). Sinicization and the Rise of China: Civilizational Processes beyond East and West (Routledge, 2012). Civilizations in World Politics: Plural and Pluralist Perspectives (Routledge, 2010). Beyond Paradigms: Analytic Eclecticism in World Politics (Palgrave, 2010), with Rudra Sil. He is the author, coauthor, editor and coeditor of about 40 books, edited volumes or monographs and over 100 articles or book chapters.

Since joining the Cornell Government Department in 1973 Katzenstein has chaired or been a member of more than one hundred dissertation committees. He received Cornell’s College of Arts and Science Stephen and Margery Russell Distinguished Teaching Award in 1993, and, in recognition of sustained and distinguished undergraduate teaching, was made one of Cornell University’s Stephen H. Weiss Presidential Fellows in 2004.