ABSTRACT
This chapter deals with the origins of uncertainty. We argue that uncertainty is an indispensable part of daily life and hence of economic scrutiny. In addition to the so-far-encountered examples of uncertainty being the “not-knowable”, this chapter clarifies the deeper reasons for these examples to arise in the first place. The most important driver of uncertainty, it is argued, is given in the main assumption, while institutions serve as uncertainty management devices.
Having formally defined uncertainty, this chapter demonstrates that uncertainty fits very well into major economic concepts and does, in fact, have the potential to close serious gaps in economic theories. In particular, uncertainty can be considered the missing link between the theoretical concept of rationality and empirical “irrationality”. It also offers clues to how decision making theories should be devised.
