The research literature in economics has explored the task of decision making under uncertainty and has developed theories about "precautionary" policies and "robust" policies. This Economic Letter summarizes some of the latest results and debates in this literature.

Twenty-five years ago, on October 6, 1979, the Federal Reserve adopted new policy procedures that led to skyrocketing interest rates and two back-to-back recessions but that also broke the back of inflation and ushered in the environment of low inflation and general economic stability the United...