Knightian Uncertainty

Knightian Uncertainty refers to a type of uncertainty about future events where the probabilities of outcomes are unknown. Unlike risk, where probabilities can be calculated (like in a casino), Knightian Uncertainty deals with situations where we have no reliable data or way to estimate likelihoods, making it impossible to assign probabilities. This concept, introduced by economist Frank Knight, highlights the limitations of decision-making under uncertainty in fields like economics and finance, emphasizing that some challenges are fundamentally unpredictable and require different strategies to manage.