I have seen this passage from Keynes before, and I'd still argue that the categories of risk and uncertainty are not at all sharp. Just to take one of Keynes' examples: "the price of copper and the rate of interest twenty years hence": if I look back at the historical copper prices over the last 200 years, I can most certainly obtain a probability distribution for copper price which if necessary can be combined with the expected statistics of copper supply and demand (similarly obtained from historical data) to project 20 years into the future.
Indeed I'd expect quant hedge funds that invest in futures probably do something like this today (maybe not 20 years). Admittedly the probabilities are very imprecisely known in these instances, but how precise do you need them to be? Is every nickel a completely fair coin where the probability of a Head is *exactly* 50%? Is a roulette wheel *absolutely* symmetric to all the numbers? It seems to me there is only one way to differentiate measurable risk from uncertainty: by asking the question "is it useful to think of a given variable in terms of probability?". That, of course, is subjective and not sharp at all. -raghu. On Tue, May 27, 2008 at 6:30 PM, Doug Henwood <[EMAIL PROTECTED]> wrote: > On May 27, 2008, at 9:18 PM, raghu wrote: >> >> I understand the risk v. uncertainty intuitively but is it even >> possible to give a coherent definition? Are these two categories as >> sharp as they appear to be? > > Keynes, "The General Theory of Employment" (journal article, not the book): > >> By 'uncertain' knowledge, let me explain, I do not mean merely to >> distinguish what is known for certain from what is only probable. The game >> of roulette is not subject, in this sense, to uncertainty; nor is the >> prospect of a victory bond being drawn.... Even the weather is only >> moderately uncertain. The sense in which I am using the term is that in >> which the prospect of a European war is uncertain, or the price of copper >> and the rate of interest twenty years hence, or the obsolescence of a new >> invention, or the position of private wealth-owners in the social system in >> 1970. About these matters there is no scientific basis on which to form any >> calculable probability whatever. We simply do not know _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
