I always thought that the distinction between risk and uncertainty in Keynes was fairly straightforward. Risk describes those situations in which the type and amount of information available is such that a statistical probability may legitimately be calculated of some event occurring (or not), whereas uncertainty describes those situations where the type and/or amount of information is such that a statistical probability cannot be legitimately calculated.
Doug in his reply to raghu gets at one of the key factors determining the degree of uncertainty--time. Ted has also discussed this in his publications. The longer the time into the future one is dealing with, the more unexpected changes might occur. Adolph Lowe identified one of the factors determining the length of the time horizon is the technological structure of production, e.g., more capital-intensive methods will generally have a longer production time. Bob Heilbroner had some interesting thoughts on economic prediction. Speaking of Freud, Bob remarked that we make predictions even in the face of uncertainty because of deep-seated human anxiety concerning the unknown, etc. On May 27, 2008, at 10:18 PM, raghu wrote: > 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). _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
