Uncertainty

Uncertainty is a state of having limited knowledge where it is impossible to exactly describe the existing state, a future outcome, or more than one possible outcome. In philosophy, uncertainty is the expression of the unknown and is associated with information theory, probability, and other areas.

Definition

Uncertainty refers to epistemic situations involving imperfect or unknown information. It applies to predictions of future events, to physical measurements that are already made, or to the unknown. Uncertainty arises in partially observable and/or stochastic environments, as well as due to ignorance, indolence, or both. It arises in any number of fields, including insurance, philosophy, physics, statistics, economics, finance, psychology, sociology, and information science.

Types of Uncertainty

Uncertainty can be classified into three types: aleatory uncertainty, epistemic uncertainty, and ontological uncertainty.

Aleatory Uncertainty

Aleatory uncertainty, or statistical uncertainty, is associated with inherent variation or randomness in the data. It is irreducible and can be characterized by a probability distribution.

Epistemic Uncertainty

Epistemic uncertainty, or systematic uncertainty, is due to things one could in principle know but doesn't in practice. It can be reduced by more research or gathering more data.

Ontological Uncertainty

Ontological uncertainty is due to the inability to conceptualize all the relevant entities and relationships among them.

Uncertainty in Different Fields

Uncertainty plays a key role in various fields, including physics, economics, finance, and psychology.

Uncertainty in Physics

In physics, the Heisenberg uncertainty principle forms a fundamental limit on the accuracy with which certain pairs of physical properties can be simultaneously known.

Uncertainty in Economics and Finance

In economics and finance, uncertainty is often modeled using stochastic processes or other probabilistic methods.

Uncertainty in Psychology

In psychology, uncertainty can be real, or just a perception, and it can be disabling or enabling.

See Also

• Risk
• Ambiguity
• Probability theory
• Information theory
• Heisenberg uncertainty principle

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