For our series “The Uncertainty Boom” we spoke with five experts on the effects of widespread uncertainty on our society, on the economy and even on the ways we think and act. 

Here, we speak with Nicholas Bloom, an economist at Stanford University who is one of leading researchers on economic uncertainty. He discusses what it is, how it is measured and how it affects companies, countries, investors and consumers. In addition to his research, he has co-developed several measures of uncertainty, including the Economic Policy Uncertainty Index. This interview has been edited for clarity and length.

How do you define uncertainty?

The inability to predict the future. If you're a business, can you tell what your sales and demand may be in six months, next year, the next two years? If you're an individual, what will your job be? The more uncertain you are, the less able you are to predict the future.

How do you measure the level of uncertainty in an economy?

There are three different ways people do it. One is they look at the stock market. Is it volatile? If it’s going up and down 1, 2, 3 percent every day because of wars, shocks, big announcements, uncertainty is high. There's something called VIX, which is a forward-looking measure of the volatility on the S&P 500. 

The second measure would be from surveys. You just literally go out and ask businesses or individuals, “How uncertain are you?” There are more sophisticated versions, which I've been involved in, for example, to get businesses to forecast low, medium and high sales and what probabilities they put against them and get a spread of their forecast. So if their low and high sales rates are far apart, they're uncertain.

The third set of approaches is around using text, primarily scraping newspapers. So you scrape, for example, the 10 leading US newspapers like The New York Times, The Wall Street Journal, The Washington Post, The Dallas Morning News, and count the number of times “uncertainty” appears. You can look at other texts, for example, the Federal Reserve’s beige book. 

Right now, there is a big disconnect, what I call the uncertainty puzzle. Until recently, financial markets, surveys and text measures all moved together. When they were high, they're all high. In 2025, text measures exploded through the roof and financial markets and surveys didn't. So financial markets and surveys right now are kind of five out of 10 on uncertainty, about average, whereas text measures are nine or 10 out of 10. 

My view is probably somewhere in between. Uncertainty is genuinely higher than average right now, and I think it primarily comes from risks to the political system. 

I was interested to read in one of your papers that there's price volatility as well, even at a micro level for people buying batteries or Diet Cokes. 

What you find is in periods of a lot of macro volatility is much more micro volatility. So take the global financial crisis in 2008.  You’re the Safeway supermarket chain and you're selling tons of products and it turns out that one of your retailers that provides you with fresh sausages, their bank went bankrupt so the retailer has had to put up prices to save the business. Another retailer that's making rival sausages used a different bank that stayed OK and they now discover that they can cut prices and scoop up a bunch of the market. 

What are other characteristics of an economy during periods of uncertainty? 

What we classically see is that businesses and consumers become more cautious. I'm a business. I was thinking about hiring some folks because I'm going to open up, say, a new store or a new bank branch or I'm a healthcare business opening maybe a new clinic. And if I'm very uncertain, I think,”Hey, let's wait. I don't know what demand's going to be or what the economy's going to do or what prices or what interest rates.” For consumers, it looks similar. So consumers may say, “I was going to go buy a new car, but I'm a bit uncertain about my job.” In all cases, when uncertainty goes up, businesses and consumers pause activity and that tends to generate a recession. 

Do periods of uncertainty always coincide with recessions?

Almost always. There are occasional exceptions. I would say nine out of 10 cases when you see measures of uncertainty spike, there's a recession. 

Is it a dynamic relationship? Can uncertainty lead to recessions or vice versa?

They move together but what is cause and what is effect is less obvious. One story is that uncertainty rises, businesses and consumers pause, and that causes a recession. Another story —  it could be called the Anna Karenina Theory of Recessions — is that boom periods are all the same. Recessions, like unhappy families, are all different. A final story is perfect reverse causality: When a recession begins, people no longer have confidence in the economy and they become uncertain. So it is very hard to tell cause and effect, but it's clear that they move together. 

Does widespread uncertainty over a technological disruption like AI feed into broader economic uncertainty?

Yes, it does. The big drivers of uncertainty right now in 2026 are politics. In the US you could read that as Trump to a large extent but across Europe, there are more extreme political parties. Brexit generated a lot of uncertainty. 

The other big factor now is AI. And AI uncertainty is a real thing. This is more like good news uncertainty for the economy. There will be the winners and losers, but on average, the economy will win. It's one of the reasons why the S&P 500 is at all-time highs. Of course, for individuals, it generates uncertainty because you may be the loser. Your job could be replaced by AI.  

Are there upsides during periods of uncertainty either for consumers or for companies? Where should we be looking for opportunities?

If you have better information, yes. Businesses are very uncertain about some tariffs, but if you have better political insight or you have a lobbyist that knows what the politicians are going to do, that's a great opportunity to rush out and capture the market or maybe buy some goods on the cheap. 

There are two ways to out-predict other people. Know more or be clever with what you know. And, you know, if you look at people who do well on the stock market, there's some combination of both. 

What are the signals that we're emerging from a period of uncertainty? 

Stock volatility tends to drop. I have something I generated that's carried now by Reuters, Bloomberg, et cetera, called the Economic Policy Uncertainty Index, which scrapes around 2,000 US daily newspapers for the frequency of the word “uncertainty,” and that also drops very fast. 

Is there always a return to certainty? Take Brexit, for example.

I have a paper I just presented at Princeton on the impact of Brexit. We've now collected almost exactly 10 years of data since the vote. What you see is it's reduced GDP by 6 to 8 percent  —about $3,000 per person in the UK — which is an enormous hit. That came from two things. One is just making it harder to trade, making it harder to immigrate, is just making the UK poorer. The second is the Brexit process itself was horrible. The pro-Brexit group didn't really have a plan about what “leave” meant. So they unexpectedly won the referendum and then were left trying to figure out what that actually meant and they spent five, six years fighting. The initial decision was not good, but also the execution was terrible.  That seems to have potentially doubled the damage. 

Could you see something like AI uncertainty persisting because we really don't know the implications? 

Probably not. In my view, AI is critically important for the overall economy. Not for individuals. This is like a lottery where most people get positive draws, but some get negative. But every indicator, every survey and data point I've seen says AI is going to have a positive effect on the economy. Yes, it increases uncertainty, but that will be more than offset by the boost of productivity. 

Explore other Uncertainty Boom interviews:

Jill Lepore, the Harvard historian, talks about her new book examining how technology is affecting our liberal democracy.

Jack Nitschke, a clinical psychologist and neuroscientist, discusses uncertainty’s effect on our brains and why it makes us less prepared for the future.

George W. Casey, a retired four-star US Army general, discusses leadership under uncertainty and the lessons he learned taking over the multinational force in Iraq in 2004.

Kate Sweeny, a research psychologist, studies how uncertain outcomes affect our behavior and sometimes prompt poor decision-making.