Risk and uncertainty are fundamentally different decision environments

Evidence

Zeckhauser (2014, 8–9) calls for more systematic economic research into uncertainty, rather than risk: “Economists now understand that risk is a terrific subject for gamblers, for students in high school math, and for insurance companies having data that enable them to predict the probabilities of micro-outcomes with reasonable reliability. But for investors, business folks, government officials, physicians, international diplomats, those in romantic pursuit, and parents of young children, indeed for almost anybody else, risk is an intriguing subject that bears little relation to the real decisions they face. Unknown outcomes confront these players every day, and the probabilities are virtually never known nor knowable. Uncertainty, not risk, is the difficulty regularly before us. That is, we can identify the states of the world, but not their probabilities.” — Aris Komporozos-Athanasiou, Speculative Communities, 388

Categorization

• DEFINE: Core definitional distinction between risk (known probabilities) and uncertainty (unknown/un-knowable probabilities) that underlies the whole homo speculans thesis.
• XREF: Connects to Knightian uncertainty from Frank Knight and to Nassim Taleb’s work — the risk/uncertainty split is foundational across decisions from romance to parenting to diplomacy. — connects to: Decisions are made under irreducible uncertainty that evidence alone cannot resolve — Christine Daigle, Jacob Golomb (eds.), Beauvoir and Sartre: The Riddle of…, 490; Securitization converts uncertainty into quantifiable, tradeable risk and shapes daily life — Max Haiven, Cultures of Financialization, 248; DSGE models rule out genuine uncertainty by requiring insurable probabilities for all events — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 782 (+1 more)