Risk, Uncertainty and Chance

Abstract

The dual purpose of this chapter is to identify the basic nature of information problems and to suggest the types of information costs associated with respective forms of economic organisation. So far we have merely indicated the existence of possible cracks in the neoclassical construction of Nirvana. We continue the search here with a view to more fully identifying the nature and source of structural defects in the foundations of neoclassical theory, and the role of risk, uncertainty, and chance in this ill-designed disaster area.

Ros.: Heads [he puts it in his bag. The process is repeated]. Heads [again] Heads [again] Heads.

Guil.: [flipping a coin] There is an art to the building up of suspense. Ros.: Heads.

Guil.: [flipping another] Though it can be done by luck alone. Ros.: Heads.

Tom Stoppard, Rosencrantz and Guildenstern Are Dead Arthur looked up.

‘Ford!’ he said, ‘there’s an infinite number of monkeys outside who want to talk to us about this script for Hamlet they’ve worked out.’

Douglas Adams, The Hitchhikers Guide to the Galaxy

My good friend Jacques Monod spoke often of the randomness of the cosmos. He believed everything in existence occurred by pure chance with the possible exception of his breakfast, which he felt certain was made by his housekeeper.

Woody Allen, My Speech to the Graduates¹