Let’s define these terms. The Chicago economist Frank Knight wrote about risk and uncertainty in 1921 (see here), the two sides of the probability coin. In brief, risk is “quantifiable” — think of a casino game like roulette, where you can calculate the odds of a bet before each spin. Uncertainty, by contrast, is impossible to quantify ex ante. Think of a “Black Swan” affair — an unpredictable event like the possibility of a nuclear war. See also the materials below:
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