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Source link: http://archive.mises.org/10886/risk-uncertainty-and-economic-organization/

Risk, Uncertainty, and Economic Organization

October 22, 2009 by

Why can’t a central planning board mimic the operations of entrepreneurs? The key, for Mises, is that entrepreneurial appraisement is not a mechanical process of computing expected values using known probabilities. FULL ARTICLE

{ 2 comments }

Weingarten October 22, 2009 at 4:43 pm

The article differentiates between “class probability” where the probabilities are known, “case probability” where they are estimated by sampling, and “entrepreneurial appraisement”, where they are intuited. As far as I am aware, statisticians and systems analysts, deal with these forms properly in theory and practice. So is there a need to extensively elaborate upon them? Perhaps a simple example could be given, which shows some difference in calculation between someone who recognizes these differences, and someone who does not?

georges lane October 24, 2009 at 8:46 am

Surely,
“Most economists are familiar with Knight’s distinction between “risk” and “uncertainty.”

But they should be also familiar with Frederic Bastiat’s thinking (1850) about uncertainty. See for example http://www.econlib.org/library/Bastiat/basHar14.html#Chapter 14

However, unfortunately, it does not appear it is the case.

I am sure that Mises was knowing this text and was inspired by its words.

Webly yours

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