Knightian uncertainty


Knightian uncertainty

In economics, Knightian uncertainty is risk that is immeasurable, not possible to calculate.

Knightian uncertainty is named after University of Chicago economist Frank Knight (1885-1972), who distinguished risk and uncertainty in his seminal work "Risk, Uncertainty, and Profit:" [Knight, F.H. (1921) Risk, Uncertainty, and Profit. Boston, MA: Hart, Schaffner & Marx; Houghton Mifflin Company]

:"Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated.... The essential fact is that 'risk' means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating.... It will appear that a measurable uncertainty, or 'risk' proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all."

Notes


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Uncertainty — For the film of the same name, see Uncertainty (film). Certainty series Agnosticism Belief Certainty Doubt Determinism Epistemology …   Wikipedia

  • Info-gap decision theory — is a non probabilistic decision theory that seeks to optimize robustness to failure – or opportuneness for windfall – under severe uncertainty,[1][2] in particular applying sensitivity analysis of the stability radius type[3] to perturbations in… …   Wikipedia

  • Frank Knight — Infobox Philosopher region = Western Economists era = 20th Century Economists color = lightsteelblue caption = name = Frank Hyneman Knight birth = birth date|1885|11|7 McLean County, USA death = death date and age|1972|4|15|1885|11|7 school… …   Wikipedia

  • Risk — takers redirects here. For the Canadian television program, see Risk Takers. For other uses, see Risk (disambiguation). Risk is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable… …   Wikipedia

  • Common-cause and special-cause — Type of variation Synonyms Common cause Chance cause Non assignable cause Noise Natural pattern Special cause Assignable cause Signal Unnatural pattern Common and special causes are the two distinct origins of variation in a process, as defined… …   Wikipedia

  • Expected utility hypothesis — In economics, game theory, and decision theory the expected utility hypothesis is a theory of utility in which betting preferences of people with regard to uncertain outcomes (gambles) are represented by a function of the payouts (whether in… …   Wikipedia

  • Entrepreneurship — is the practice of starting new organizations or revitalizing mature organizations, particularly new businesses generally in response to identified opportunities. Entrepreneurship is often a difficult undertaking, as a vast majority of new… …   Wikipedia

  • Chicago school of economics — Part of the series on Chicago school of economics Movements Libertarianism Neoliberalism Neoconservatism …   Wikipedia

  • Risk modeling — refers to the use of formal econometric techniques to determine the aggregate risk in a financial portfolio. Risk modeling is one of many subtasks within the broader area of financial modeling.Risk modeling uses a variety of techniques including… …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.