Defining Uncertainty

Abstract

The paper examines the emergence and development of the concept of uncertainty in economic thought. A comparative analysis of the concept of uncertainty in the theories of Frank Knight and John Maynard Keynes is carried out. Despite the similarity of the interpretation of uncertainty, Knight and Keynes come to different conclusions regarding the role of economic uncertainty and the need to "fight" it. According to Keynes, uncertainty is one of the main reasons for fluctuations in investment and, accordingly, aggregate demand. Keynes considers it necessary to conduct fiscal policy to reduce the level of uncertainty. Unlike Keynes, Knight believes that market methods of overcoming uncertainty are sufficient and targeted government influence on the entire economic system is not required. The role of uncertainty in Joseph Schumpeter's theory of economic development is analyzed. According to Schumpeter, with technical progress the economic system will move closer to socialist planning, which should help reduce the level of uncertainty. Uncertainty is considered as the basis of the methodology of representatives of the neo-Austrian school Ludwig von Mises and Friedrich von Hayek, according to whom only a free market, through the transfer of information, helps to effectively solve the problem of choice in conditions of uncertainty associated with the variability of circumstances and people's preferences, as well as the dispersion of knowledge. The reasons for the decline of scientific interest in Knightian and Keynesian uncertainty in the mainstream, associated with the strengthening of formalization of economic theory, and the current growth of economists' attention to the role of uncertainty, caused by the emergence of many quantitative methods for measuring its level, are identified. An overview of the development of the concept of uncertainty in post-Keynesianism and new institutional economics is presented