ABSTRACT
This chapter elucidates the distinction between different types of uncertainty, their relevance to climate change and implications for research and policy. Risk can be defined as the case where the set of all future events are known but the occurrence of any one event is only a potential. The standard theory of decision-making under uncertainty modifies the normal economic assumption of perfect knowledge to account for risk. That is, rather than being certain as to the outcome of their choices, the decision-maker still knows all future possible outcomes but only the probability of their occurrence. Empirically observable and repeatable events, such as a coin toss, allow the construction of what are termed ‘objective’ probabilities or risks of an event occurring. As global warming becomes a predominant trend 50 million people living in the arid areas of the Third World will be forced off their land by persistent droughts.
