• Adam Smith Institute

    Adam Smith Institute place holder
  • Philosophy & Logic

    Philosophy and Logic
  • Cambridge

    Cambridge
  • Children’s SF

    Children's Science Fiction
  • Enter your email address to follow this blog and receive notifications of new posts by email.

    Join 419 other followers

Risk versus uncertainty

Prof John Kay of the London School of Economics delivered a paper to the Galapagos meeting of the Mont Pelerin Society on the issue of risk versus uncertainty. Risk refers to events that might happen and where the probability is subject to calculation, whereas uncertainty covers events that might occur but are not susceptible to this treatment. Prof Kay covered the history of a dispute between the side (led by Keynes) that asserted there was an important difference between the two, versus the opponents who recognised no such distinction. Historically the “no difference” school prevailed, but recent events have led to renewed interest in the other viewpoint. Hayek took the view that there are what Donald Rumsfeld called “unknown unknowns.” It comes easier to an Austrian economist to suppose that there are events that can neither be predicted not have their probability quantified. The world is a messy old place that stubbornly refuses to be put into boxes and be classified mathematically. Even without the unpredictability that human beings bring to it, nature can serve giant helpings of the unforeseen.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: