Risk

From Hobson's Choice

Risk and uncertainty are (usually) regarded as distinct topics in economics. Risk is quantifiable; uncertainty is not. Or, in the words of Frank L. Knight,

The essential fact is that "risk" means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomenon depending on which of the two is really present and operating. There are other ambiguities in the term "risk" as well, which will be pointed out; but this is the most important. It will appear that a measurable uncertainty, or "risk" proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all. We shall accordingly restrict the term "uncertainty" to cases of the non-quantitative type. It is this "true" uncertainty, and not risk, as has been argued, which forms the basis of a valid theory of profit and accounts for the divergence between actual and theoretical competition.
[Risk, Uncertainty, and Profit, 1921]

James R MacLean (17:06, 18 September 2007 (PDT))