Professor Mervyn King explains the economics of “stuff happens”

The world is very uncertain, but it’s not
uncertain in the way that rolling a dice is where you know what different faces
on the dice could be and what the probability of each one is. The world is
uncertain in the sense that we have no idea what could happen in the future, and
we have no I- ability to attach probabilities to these various outcomes, in other words
stuff happens. This was immortalized by Donna Rumsfeld in the phrase “unknown
unknowns”. I prefer to call it unknowable unknowns, we are not in a position of
being capable of knowing everything that could happen in the future and so the
big lesson from that is not to pretend that we can adopt a scientific or
statistical approach to uncertainty in every event, but to recognize that in
some cases, particularly those kinds of risks that affect whether the economy is
in a boom or a slump, – stuff happens and we need a robust response to make
the economy more resilient, but not by calibrating it to some you know known
statistical estimate of what will happen. We just have to be prepared to do
something not being clear about how things could go wrong

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