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The treatment of knowledge and uncertainty is one of the main issues in the theoretical and methodological distinction among different schools of thought and approaches in economics. This paper surveys the economic literature to associate several economists and schools of economic thought with a particular concept or combination of concepts of uncertainty. It does so by applying to this literature a typology and refinements of concepts developed elsewhere (Dequech, 2008a). This typology can be summarized as follows. As defined by Giovanni Dosi and Massimo Egidi (1991), substantive uncertainty results from ‘the lack of all the information which would be necessary to make decisions with certain outcomes’ and is contrasted with procedural uncertainty, which arises from ‘limitations on the computational and cognitive capabilities of the agents to pursue unambiguously their objectives, given the available information’ (p. 145). As defined by myself, strong uncertainty, in contrast to the weak variety, is characterized by the absence of unique, additive and fully reliable probability distributions, used either explicitly or implicitly by individuals (a unique distribution is the only admissible one and has only point probabilities, as distinct from intervals. An additive distribution has probabilities that add up to unity or 100%). Strong uncertainty may substantive and/or procedural.1 When it is substantive, strong uncertainty may be subdivided into two categories: ambiguity and fundamental uncertainty. Ambiguity, in the terms used by Colin Camerer and Martin Weber (1992: 330), is ‘uncertainty about probability, created by missing information that is relevant and could be known’. This definition can be refined by noting that, even though the decision-maker under ambiguity does not know with full reliability the probability that each event (or state of the world) will obtain, he/she usually knows all the possible events. Even when not completely known, the list of all possible events is already predetermined or knowable ex ante. Fundamental uncertainty, in contrast, is characterized by the possibility of creativity and non-predetermined structural change. The list of possible events is not predetermined or knowable ex ante, as the future is yet to be created. This is the basic notion of fundamental uncertainty. It can be refined by bringing institutions and some features of the process of technological change into consideration, so that there need not be complete ignorance about the future. These basic distinctions are described in the following table.
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