Knightian uncertainty

In economics, Knightian uncertainty is risk that is immeasurable, not possible to calculate.

Knightian uncertainty is named after University of Chicago economist Frank Knight (1885-1972), who distinguished risk and uncertainty in his seminal work "Risk, Uncertainty, and Profit:" [Knight, F.H. (1921) Risk, Uncertainty, and Profit. Boston, MA: Hart, Schaffner & Marx; Houghton Mifflin Company]

:"Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated.... The essential fact is that 'risk' means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating.... It will appear that a measurable uncertainty, or 'risk' proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all."

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