Category Archives: Radical Uncertainty: Decision-making for an Unknowable Future

Radical Uncertainty: Decision-making for an Unknowable Future

Get notified of our activities and latest publications. We do not know what the future will hold, particularly in the midst of a crisis, but we must make decisions anyway. We regularly crave certainties which cannot exist and invent knowledge we cannot have, forgetting that humans are successful because we have adapted to an environment that we understand only imperfectly. Throughout history we have developed a variety of ways of coping with the radical uncertainty that defines our lives.

This incisive and eye-opening book draws on biography, history, mathematics, economics and philosophy to highlight the most successful — and most short-sighted — methods of dealing with an unknowable future. Ultimately, the authors argue, the prevalent method of our age falls short, giving us a false understanding of our power to make predictions, leading to many of the problems we experience today. Go to magazine. Get notified of our activities and latest publications Subscribe.

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Tightly argued, provocative and written with wit and flair, Radical Uncertainty is at once Go to magazine. Book Club Media. Read More. Infographic Media. Activities Media.

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Magazines Media. Search for: Search.I have covered some of the ideas in the book in previous posts here and here but have now had the chance the read the book in full and can recommend it.

I have included more detailed notes on the book here but this post offers a short introduction to some of the key ideas. One of the things that makes the book interesting is that they were once true believers in decision making models based on rational economic agents seeking to maximise or optimise expected value.

As students and academics we pursued the traditional approach of trying to understand economic behaviour through the assumption that households, businesses, and indeed governments take actions in order to optimise outcomes.

We learnt to approach economic problems by asking what rational individuals were maximising. And if businesses were not maximising shareholder value, we inferred that they must be maximising something else — their growth, or the remuneration of their senior executives.

The limits on their ability to optimise were represented by constraints: the relationship between inputs and outputs in the case of businesses, the feasibility of different policies in the case of governments, and budget constraints in the case of households.

Kay and King are not saying that these models are useless. They continue to see some value in the utility maximisation model but have come to believe that it is not the complete answer that many economists, finance academics and politicians came to believe. Although much can be learnt by thinking in this way, our own practical experience was that none of these economic actors were trying to maximise anything at all.

This was not because they were stupid, although sometimes they were, nor because they were irrational, although sometimes they were. They argue that the approach works up to a point but fails to deal with decisions that are in the domain of radical uncertainty. But we show in this book that the axiomatic approach to the definition of rationality comprehensively fails when applied to decisions made by businesses, governments or households about an uncertain future.

Frequently they do not know what is going to happen and cannot successfully describe the range of things that might happen, far less know the relative likelihood of a variety of different possible events. Knight and Keynes argued that probability is an objective concept confined to problems with a defined and knowable frequency distribution.

Ramsey and de Finetti won, and Keynes and Knight lost, that historic battle of ideas over the nature of uncertainty. The use of subjective probabilities, and the associated mathematics, seemed to turn the mysteries of radical uncertainty into puzzles with calculable solutions. Ramsey and de Finetti laid the foundations for economists to expand the application of probability based thinking and decision making.

Milton Friedman picked up the baton and ran with it.

Radical Uncertainty: Decision-making for an Unknowable Future

There is a lot more to the book than interesting historical anecdotes on the history of economic ideas. The subject matter is rich and it crosses over topics covered previously in this blog including:.

I am yet to review this book but have some detailed notes here. One quibble with the book is that I think their critique of the Bayesian method is a bit harsh. I understand their concern to push back on the idea that Bayes solves the problem of using probability to understand uncertainty. At times however it reads like Bayes has no value at all. Bayes may not help with mysteries but its application in puzzles should not be undervalued.

I want to come back to the topics of risk and uncertainty in a future post but it will take time to process all of the overlapping pieces. In the interim, I hope you found the overview above useful. After working in the Australian banking system for close to four decades, I am taking some time out to write and reflect on what I have learned.

My primary area of expertise is bank capital management but this blog aims to offer a bank insider's outside perspective on banking, capital, economics, finance and risk.

View all posts by From the Outside. You are commenting using your WordPress. You are commenting using your Google account. You are commenting using your Twitter account.

You are commenting using your Facebook account.This is a necessary critique and they make it with verve, knowledge and a wealth of stories' Financial Times 'An elegant, wise and timely book' Irish Times 'Jam-packed with erudition' New Statesman This major, critically acclaimed work asks a vitally important question for today: when uncertainty is all around us, and the facts are not clear, how can we make good decisions?

We do not know what the future will hold, particularly in the midst of a crisis, but we must make decisions anyway. We regularly crave certainties which cannot exist and invent knowledge we cannot have, forgetting that humans are successful because we have adapted to an environment that we understand only imperfectly. Throughout history we have developed a variety of ways of coping with the radical uncertainty that defines our lives.

This incisive and eye-opening book draws on biography, history, mathematics, economics and philosophy to highlight the most successful - and most short-sighted - methods of dealing with an unknowable future.

Ultimately, the authors argue, the prevalent method of our age falls short, giving us a false understanding of our power to make predictions, leading to many of the problems we experience today. Lord King was made a life peer in and appointed by the Queen a Knight of the Garter in He is the author of The End of Alchemy. He is a director of several public companies and for many years contributed a weekly column to the Financial Times.

He chaired the UK government review of equity markets which reported in recommending substantial reforms. Labirint Ozon. Radical Uncertainty : Decision-making for an unknowable future. Mervyn KingJohn Kay. The Unknowable Future. Puzzles and Mysteries. Radical Uncertainty is Everywhere. Thinking with Probabilities. Ambiguity and Vagueness. Probability and Optimisation. Rationality and Communication. Challenging Narratives. The World of Finance.Estimated delivery business days.

Format Paperback. Condition Brand New. Description This ambitious and thought-provoking new work offers an overarching analysis of decision-making in all walks of life. Uncertainty pervades the big decisions we all make in our lives. How much should we pay into our pensions each month? Should we take regular exercise? Expand the business? Change our strategy? Enter a trade agreement? Take an expensive holiday? We do not know what the future will hold. But we must make decisions anyway.

So we crave certainties which cannot exist and invent knowledge we cannot have. But humans are successful because they have adapted to an environment that they understand only imperfectly.

Throughout history we have developed a variety of ways of coping with the radical uncertainty that defines our lives. This incisive and eye-opening book draws on biography, history, mathematics, economics and philosophy to highlight the most successful - and most short-sighted - methods of dealing with an unknowable future Ultimately, the authors argue, the prevalent method of our age falls short, giving us a false understanding of our power to make predictions, leading to many of the problems we experience today.

Lord King was made a life peer in and appointed by the Queen a Knight of the Garter in He is the author of The End of Alchemy. He is a director of several public companies and for many years contributed a weekly column to the Financial Times.

He chaired the UK government review of equity markets which reported in recommending substantial reforms. Grand Eagle Retail is the ideal place for all your shopping needs!

With fast shipping, low prices, friendly service and over 1, in stock items - you're bound to find what you want, at a price you'll love! Please view eBay estimated delivery times at the top of the listing. We are unable to deliver faster than stated.Two leading economists discuss decision making in conditions of radical uncertainty, where we can neither imagine all possible outcomes nor assign probabilities to future events.

Uncertainty surrounds all the big decisions we make in our lives. How much should we pay into our pensions each month? Should we take regular exercise? Expand the business?

Change our strategy? Enter a trade agreement? Take an expensive holiday? We do not know what the future will hold. But we must make decisions anyway. So we crave certainties which cannot exist and invent knowledge we cannot have.

But humans are successful because they have adapted to an environment that they understand only imperfectly. Throughout history we have developed a variety of ways of coping with the radical uncertainty that defines our lives. Mervyn King and John Kay, authors of a new book on decision making in conditions of radical uncertainty, will draw on biography, history, mathematics, economics and philosophy to highlight the most successful - and most short-sighted - methods of dealing with an unknowable future.

They will argue that contemporary approaches to dealing with uncertainty rely on a false understanding of our power to make predictions, leading to many of the problems we experience today.

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Sign up for news about events. Search Go. Events Radical Uncertainty: decision making for an unknowable future. John Kay. Professor Lord King. Professor Sir Tim Besley.

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Radical Uncertainty: Decision-making for an Unknowable Future

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Radical Uncertainty: decision making for an unknowable future

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Watford were in the game for a brief spell against United last time out but to be fair it could and probably should have 4-0 or 5-0 before the Hornets won their penalty. They head to north London with all of their top boys available now and they will be looking forward to the game. The only thing standing in the way of City and a comprehensive win here is City themselves. And that makes this the banker game of the season.

Spurs, meanwhile, missed three sitters.If anyone is interested in getting some real work done in music, feel free to contact me via fb or email. People constantly tell me my music is better than everything on the radio, that I should be signed to a major label, etc. My music can be heard at YouTube. This definitely has opened my eyes or should i say ears.

Radical Uncertainty: Decision-making for an Unknowable Future

Some very good pointers as well as confirmations of what i am doing right and wrong. I will definitely keep this close. Thank you so much!!. Get a Lenovo Z50. Have a friend assemble one according to the latest recommended specs.

It does matter if you use Mac or PC??. Hope that clears it up. I read all your tips.

Radical Uncertainty: Decision-making for an Unknowable Future

I needed this, thanks. Feel free to check me out on SoundCloud as well. I am very satisfied with my sounds but I am struggling to connect them together (transition between sounds and beats). I love this article. I have had a hard time finding good resources online, and already figured out most of this stuff the hard way, like adjusting parameters for 5 minutes, or not getting good samples, and especially getting depressed at the pros work.

Thank you ZacThis is a fantastic list but I think you have a few hefty and untrue statements in there. Free software will not make generally make great music.

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I use an ancient Cubase and its workflow smashes Reaper. Also you have made out in your list that EQ and compression are of little importance in terms of general use and mixing and mastering.

Volume mixing and automating makes a surprisingly good difference but EQ makes the difference between it sounding like someone is holding a cushion over your speaker, or not. Compression can hold a track together and give a lot of power and punch. Also with the good headphones, not necessary. I would add to the list that work flow is important. Like it all I tell myself a lot of this and never listen, but sinks in when you hear it elsewhere!!. Thanks for putting this together.

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COM Matt Mann Bangin track. Rolling Tartana Beatz Thanks man. Luis Castaneda I read all your tips. Thank you Zac Phuzion1 This is a fantastic list but I think you have a few hefty and untrue statements in there.

Other than the above superb list. Ankit Kumar Great article.