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01/29/2019

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John Quiggin

I've been arguing for twenty years or so that the real issue is unawareness, that is, rejecting the idea that it is possible to list all possible consequences of a decision or all states of nature relevant to the outcome. There is a literature developing on this, already large in absolute terms, but tiny relative to that on Knightian uncertainty (aka ambiguity).

Here's a bibliography last updated in 2014 I think http://faculty.econ.ucdavis.edu/faculty/schipper/unaw.htm

Eric Schliesser

Thank you, John. I have been circulating a paper that looks at Arrow's tendency to displace Knight's original account of uncertainty with a finite list of possible outcomes/states. So, I am pleased to learn there is a much larger literature. What is the canonical paper on unawareness in your view (that is, on rejecting the idea that it is possible to list all possible consequences of a decision or all states of nature relevant to the outcome)? Does any of them connect it to Knight's original ideas?

John Quiggin

(I thought I posted this earlier, but apparently not) It's a bit hard to tell what Knight really thought, because the language of subjective probability hadn't been developed. Arguably, all Knight meant was to say that some events don't have well-defined frequentist/objective probabilites. That's why people talk more about Ellsberg in this context.

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Here's a link to my past blogging (and discussions involving me) at: New APPS.

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