A Taxonomy of Types of Uncertainty

Abstract

This study considers an expanded meaning of "uncertainty" as it affects decision-makers. The definition adopted is based on a decision-maker who is uncertain, i.e. aware of the insufficiency of her knowledge for the purpose of rationally determining which option to choose. A taxonomy of uncertainties is developed from this definition. The first stage is a Generalized Decision Model, which expands on a standard decision model often assumed in technical works by allowing uncertainty over components of the model that are assumed to be perfectly known in the standard model. These additional potential "subjects" of uncertainty include the feasibility of options, the authority of the decision-maker to effect a choice, membership of and probability distributions over the set of possible future states of the world, and considerations about how the consequences are to be valued. The taxonomy also describes possible "sources" of uncertainty, dividing them into characteristics of the world (e.g. variability), evidence the decision-maker has (e.g. ambiguity or imprecision), or characteristics of the decision-maker himself. Other important ways in which uncertainties can vary is whether they are hard (irreducible in principle) or soft, whether a decision is unique or repeatable, and the role time has in the decision and in the resolving of the uncertainties. A finding of this work is that many uncertainties in addition to the uncertainty in the standard decision model over the future state of the world can keep a procedure for implementing rational choice from being decisive, thus requiring another (nonrational) process to complete the selection of an option. Other insights: (1) Deciding is only part of being rational, and in many instances is not the most important part. (2) Uncertainty may complicate decision-making, but is by no means always bad for the decision-maker. (3) Rationality is inescapably subjective in any implementation. (4) True "decision under certainty" does not exist. (5) Uncertainties vary sufficiently that no single treatment can be prescribed; it is hoped that this work contributes to a survey of the territory of uncertainty that facilitates Smithson's (1988) "suburbanization" or subdivision into smaller tracts to be developed individually.

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