Source: Knight, F H (2002/1921), Risk, Uncertainty and Profit, Washington, DC: BeardBooks.
Monday, May 31, 2010
Risk versus Uncertainty
Prof Frank H Knight (1921) proposed that "risk" is randomness with knowable probabilities, and "uncertainty" is randomness with unknowable probabilities. However, risk and uncertainty both share features with randomness. The illustration below explains the relationship of the concepts better than words...
Source: Knight, F H (2002/1921), Risk, Uncertainty and Profit, Washington, DC: BeardBooks.
Source: Knight, F H (2002/1921), Risk, Uncertainty and Profit, Washington, DC: BeardBooks.
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