« Living Wage macroeconomics | Main | Unavoidable failure »

November 06, 2013


Feed You can follow this conversation by subscribing to the comment feed for this post.

Luis Enrique

no Rumsfeld unknown unknowns quote?

development economists like this idea - see Hausmann Rodrik, Economic Development as Self-Discovery (2002)


Chris, you seem to make little difference between ignorance and uncertainty.
I would propose to define "uncertainty" as not knowing the future, and "ignorance" as not knowing the present.
A professional poker player knows the odds and the strategy, but it does not know which card will come on the river. The fish doesn't know either (the worst ones believe they can guess), but he does not know the strategy either.
This said, ignorance is indeed overlooked by economics. Perfect information, along with perfect competition and rationality, is a condition for the optimality of a free market economy. In such an economy, however, firms don't make a profit at all. The only way they can turn a profit is by building on competitive biases or their most valuable resource, as you point out, ignorance (ignorance of others).


Another way of expressing this would be that the primary and persistent driver of long-run economic growth is curiosity.

This would be an optimistic interpretation, in contrast to the pessimistic interpretaion of the Austrians (ignorance is inescapable).

Steve Roth

Not understanding is also ignorance.

Two people could have the same information/data. But one has an analytical methodology, an understanding, of that data, that the other doesn't have.

Is the one lacking a useful way to understand the data/information "ignorant"? I'd say so.


Maybe also worth distinguishing between ignorance and stupidity. "Some scientists claim that hydrogen, because it is so plentiful, is the basic building block of the universe. I dispute that. I say there is more stupidity than hydrogen, and that is the basic building block of the universe." Frank Zappa

Luis Enrique

I'm not sure if you are really claiming that economics ignores ignorance, and the value of knowledge acquisition, but our culture / ideology certainly does not ignore the virtues of innovation, entrepreneurs, and the acquisition and spreading of knowledge . So anybody who wants to claim economists neglect it has to say our broader ideology isn't influenced by them.

I'm never sure how important this stuff is in practice. I mean apart from the obvious point that life is unpredictable, when do these distinctions matter:

1 I can think of these possible outcomes and estimate these associated probabilities, aware that this is just a best guess
2 I can think of outcomes but think probabilities are meaningless in this context
3 I realise there are outcomes I cannot even envisage

My guess is that behaviour under each won't differ much, and will essentially involve leaving a margin for error and expecting life to mock your best laid plans.


I think at least some of this comes under the Theory of Unawareness (or "Economics of Unawareness" or whatever)

(incomplete) Bibliography (and no, I have not read even a twentieth of those papers):


Luis Enrique

thanks notsneaky I was completely unaware of that stuff. I had been poking around on this topic overnight. There is, predictably, also a large literature on consumer search and also models of information acquisition.

some examples:



The comments to this entry are closed.

Why S&M?

Blog powered by Typepad