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Antonin Caors's avatar

Let's have the economists chime in. In decision-making theory, uncertainty refers to a specific situation where risk cannot be evaluated. The classical field of decision-making (DM) theory relied on weighing various possible outcomes and optimizing for expected value, thus reducing your type 2 uncertainty--which is usually just called "risk".

However, behaviorists and cognitive scientists were soon to realize that human beings do, in fact, not readily compute expected utilities (hence 95% of the micro-economic neoliberal doxa is plain wrong btw but that is another story, thanks Kahneman & Tversky). Rather, we display an innate aversion for uncertainty: even when it does not make sense from an expected utility point of view, we tend to prefer situations that we can read and understand rather than situations that are fuzzy and ill-formed. A bird in the hand is, quite literally, worth two in the bush...

When designing DM frameworks (think resources allocation mechanisms, insurance contracts etc.), marketing was very swift at taking advantage of this bias (think yield management...)

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