Radical Uncertainty: Decision-Making Beyond the Numbers

This illuminating work presents compelling arguments about the distinction between the concepts of risk and uncertainty, and the impact of both on modern finance, economics, and decision-making. Financial and economic risks often are calculated, and future risks are predicted, using various mathematical methods, especially probabilistic distributions. Uncertainty is defined as information that is unknown. Economists Kay (fellow, St John’s Coll., Oxford; Other People’s Money: The Real Business of Finance) and King (Stern Sch. of Business, New York Univ.; The End of Alchemy: Money, Banking, and the Future of the Global Economy) show how radical uncertainty stems from the economic idea of Knightian uncertainty, in which there is a lack of quantifiable knowledge. These radical uncertainties are associated with a lack of information; therefore, they cannot be measured or calculated. The authors recommend using narratives and other qualitative methods to make well-informed decisions, and they use several historical anecdotes across industries and institutions to support their assertions.