There are situations in life where we know that we confront uncertainty about a future outcome, yet --- when we are honest --- we also know that we are virtually powerless to attach probabilities to those outcomes that we can imaging happening (not to mention those that we do not imagine happening).
Frank Knight introduced the term uncertainly to cover this uncomfortable situation. Since Knight's time, there has been some effort devoted to the understanding of uncertainty, but almost none of this has filtered itself into the world of economic, financial, or business modeling. This seems to present an opportunity for research, or at least for thoughtful scholarship.
Over the next year or so (2007-2008), I plan to give myself a little reading course in this area, and, if the topic interests you, I'd be delighted to chat. As I find suitable references, I will add them to this page so that in due course it can serve as a resource for people who are curious about this important but under studied topic.
In the meanwhile I'll also move a few of my "uncertainty related" quotations to this page.
"Doubt is uncomfortable, but certainty is ridiculous." ---- Voltaire. Recently quoted by Jonathan Reiss in a useful essay on asset allocation.
Reiss, whose firm is one of the four market makers of CME Housing Futures, also has a nice OP-ED piece in Barron's. The article suggests --- in theory at least --- that there is a role for "hedge fund swaps" as a surrogate vehicle for shorting hedge funds. The added liquidity, and information flows, should benefit everyone. After all, one is often foolish to buy what cannot be shorted.
"We will rarely, if ever, measure sigma-squared to one significant digit." --- John W. Tukey, from his essay Sunset Salvo.
In the same essay, Tukey gave a substantial list of what he called "antihubrisines" --- things that may protect us from hubris in statistical modeling and data analysis. Mastery of the antihubrisines, should be required for all MS and Ph. d students. Professors should be required to take annual check-ups.