The difference between risk and uncertainty is the theme of this work. Applying the same techniques to understanding both, and the gentle slide into an unjustified sense of understanding and confidence about complex decisions, can be the fatal flaw for significant decisions. Risk can be defined by probabilities. The calculation of likelihood can be based on past experience and modelling based on the examination of information. Uncertainty cannot be defined by probabilities. This is because enough information about an uncertain event simply does not exist or cannot be known.
Radical Uncertainty is jam-packed with erudition, sometimes too much so. The stories about everyone from Max Planck to David Beckham are well-told, but they risk turning the book into a grab-bag of everything the Ks have picked up in their combined century of professional endeavour, right down to a potted history of dentistry. There is a lot of value here. But perhaps the book works best as a modern version of those takedowns of communism that recovering ex-Marxists wrote in the 1930s and 1940s: intelligent people trying to come to terms with the fact that the dogmas they had swallowed weren’t actually true.
Forty years after they first wrote a book together, they have joined forces again to produce a rant. An eloquent, highbrow, entertaining and enlightening rant, but a rant all the same. The authors’ bugbear is the standard approach to uncertainty in economics and related disciplines, which requires a comprehensive list of possible outcomes with well-defined numerical probabilities attached.
The book is well written, though, and is often entertaining. It is just that it goes on entertaining for quite a while. It can be read by the general reader, but I think its core audience is people who calculate financial risk. It’s not so much that the lay reader wouldn’t understand it, but more that it spends a lot of time attacking an error — the false precision of numbers and forecasting — that most people don’t encounter a great deal.