Risk Is Not the Same as Uncertainty
A risk is exposure to possible harm. Economists draw a sharp line between risk and uncertainty.
A risk is the possibility of loss or harm. Economists since Frank Knight in 1921 distinguish it from *uncertainty*: risk is when the odds are knowable, as with a dice roll or an actuarial table, while uncertainty is when they are not, as with a genuinely novel situation. Insurance can price risk; it cannot price uncertainty. The word came through French and Italian *risco*, of disputed origin — possibly from a Greek word for a cliff, the hazard a ship must sail around.
- Possible harm. *A serious risk.*
- To expose to danger. *Risking everything.*
- Risky — dangerous. *A risky plan.*
- Uncertainty — a distinct concept. *Uncertainty.*
- Italian — *risco*. *The source.*
Word forms
| Form | Word | Example |
|---|---|---|
| Noun | risk | A risk. |
| Verb | risk | Risking. |
| Adjective | risky | Risky. |
| Adjective | risqué | Risqué. |
| Italian | risco | Risk. |
- There is a risk of flooding.Hazard.
- He risked his savings.Verb.
- Risk has knowable odds.Economics.
Knight's distinction
- Risk — the probabilities are known or calculable
- Uncertainty — the probabilities cannot be known
- Insurance works on risk, pooling known odds
- Entrepreneurship, Knight argued, is paid for bearing uncertainty
- Mistaking one for the other is a common source of error
French *risque*, from Italian *risco*, of disputed origin, possibly from Greek *rhiza*, a cliff.
What is the difference between risk and uncertainty?
Risk means the odds can be calculated; uncertainty means they cannot. Insurance can price the first but not the second.
Is risqué the same word?
Yes, borrowed separately from French, meaning risky in the sense of mildly indecent.