The example of uncertainty which Kay and King repeatedly use is former US president Barack Obama’s decision to launch the attack on Osama bin Laden. In particular there is an elaborate economic analysis which shows how to approach a decision if the probabilities are known (using insurance, for example). The two situations involve quite different responses. The latter events include the ‘unknown unknowns’, or as Kay and King call them ‘radical uncertainties’. Briefly, risk is about where there are probabilities attached to future events uncertainty is where there are not. A useful starting point is the distinction between ‘risk’ and ‘uncertainty’ which faces anybody thinking about, or preparing for, the future. Kay left senior positions in the academy to work as a consultant and as a columnist and he has written a number of earlier books (some of which I should have reviewed) King was Governor of the Bank of England from 2003 to 2013 so that he oversaw the central bank during the Global Financial Crisis.īecause it is a serious critique of economics, the book has to go back into the foundations of the discipline. The authors are senior economists who have taught at major universities. So it is with considerable pleasure that one engages with John Kay and Mervyn King’s Radical Uncertainty. The critics may go on to attack physics by citing Newton. It is easy to criticise economic science by misrepresenting it, by selective quotations, and by ignoring that it progresses, like all sciences, by improving and abandoning old theories. Two senior economists challenge some of the foundations of current economics. This is a re-post of an article originally published on .nz.

The future of a radical price