Risk, Choice, and Uncertainty

Here is a paragraph from my review of George Szpiro’s book:

While Szpiro tells a highly engaging and informative story about the discipline that mostly purged true uncertainty from its textbooks, he does so unreflectively. The lack of reflection is apparent from the illustration of Kahneman and Tversky’s concept of framing. Szpiro asks the reader to “imagine that the U.S. is preparing for the outbreak of an unusual Asian disease which is expected to kill 600 people” while presenting the reader with two programs one of which is “uncertain” in that if chosen, people would be “risk taking” (p. 198) by facing certain payoffs with certain probabilities. The problem is — as Michael J. Ryan, the Executive Director of the World Health Organization’s Health Emergencies Programme, recently pointed out — that we often find ourselves in situations where “there are no numbers that say if this number is this then you do that” (WHO 2020). After all, Frank Knight (1921) and John Maynard Keynes (1936, 1937) reminded us that not all decisions have the character of a lottery. The lack of reflection on when and how reducing true uncertainty to calculable risk took place in economics is, in my opinion, a serious omission of the otherwise excellent book.

Read the whole review at EH.net.