Abstract
This study is concerned with Knightian uncertainty as a viable concept in individual behavior. Events can be categorized under the headings of certainty, risk, and uncertainty. In terms of probability, a certain event has a probability of one attached to its occurrence. Any event with a probability of occurring that is less than one is either a risk or an uncertainty. If the probability of an event is known, the event is a risk. Uncertainty only applies to those events for which the probability of occurring is unknown. Thus, a degree of naivete must exist concerning the probability of an event's occurrence for it to be categorized as uncertain. The main part of this study is dictomized into a study of the evolution of uncertainty in economics and an experimental analysis of individual behavior under conditions of uncertainty. Its purpose is twofold: to investigate the reasons for the demise of the concept of uncertainty in the economic literature, and to experimentally test individual behavior under varying conditions of uncertainty. The focus of the experiments performed in the uncertainty literature has been predirected due to the causes of the concept's initial demise, i.e., lack of formalization and skepticism. Several important results can be drawn from this study. Uncertainty, as an economic concept, has lacked the formalization required of modern economic theory. Though, initially, uncertainty was construed as the cause of economic profits, it presently serves as a paradox in individual behavior. The economic discipline no longer incorporates uncertainty into the theory of firm..
Stone, Brice M. (1978). Knightian uncertainty : an historical and experimental evaluation. Texas A&M University. Texas A&M University. Libraries. Available electronically from
https : / /hdl .handle .net /1969 .1 /DISSERTATIONS -323535.