Borrowing from Keynes’ A Treatise on Probability: a non-probabilistic measure of uncertainty for scenario planning

Scenario planning is a tool used to formulate contingent but potentially impactful futures to aid strategic decision-making. A crucial element of many versions of scenario planning is an assessment of levels of uncertainty about the broad drivers of change within the system under consideration. Despite the importance of this element, the scenario planning literature is largely silent on the appropriate conception of uncertainty to use, exactly what it attaches to and how it might be measured. This paper seeks to fill this gap by advancing a non-probabilistic measure of uncertainty based on the concept of evidential weight drawn from the economist John Maynard Keynes' 1921 A Treatise on Probability

Uncovering unknown unknowns: towards a Baconian approach to management decision-making

Bayesian decision theory and inference have left a deep and indelible mark on the literature on management decision-making. There is however an important issue that the machinery of classical Bayesianism is ill equipped to deal with, that of “unknown unknowns” or, in the cases in which they are actualised, what are sometimes called “Black Swans”. This issue is closely related to the problems of constructing an appropriate state space under conditions of deficient foresight about what the future might hold, and our aim is to develop a theory and some of the practicalities of state space elaboration that addresses these problems. Building on ideas originally put forward by Bacon (1620), we show how our approach can be used to build and explore the state space, how it may reduce the extent to which organisations are blindsided by Black Swans, and how it ameliorates various well-known cognitive biases

De Finetti on the insurance of risks and uncertainties

In the insurance literature, it is often argued that private markets can provide insurance against ‘risks’ but not against ‘uncertainties’ in the sense of Knight ([1921]) or Keynes ([1921]). This claim is at odds with the standard economic model of risk exchange which, in assuming that decision-makers are always guided by point-valued subjective probabilities, predicts that all uncertainties can, in theory, be insured. Supporters of the standard model argue that the insuring of highly idiosyncratic risks by Lloyd's of London proves that this is so even in practice. The purpose of this article is to show that Bruno de Finetti, famous as one of the three founding fathers of the subjective approach to probability assumed by the standard model, actually made a theoretical case for uncertainty within the subjectivist approach. We draw on empirical evidence from the practice of underwriters to show how this case may help explain the reluctance of insurers to cover highly uncertain contingencies

De Finetti on uncertainty

The well-known Knightian distinction between quantifiable risk and unquantifiable uncertainty is at odds with the dominant subjectivist conception of probability associated with de Finetti, Ramsey and Savage. Risk and uncertainty are rendered indistinguishable on the subjectivist approach insofar as an individual’s subjective estimate of the probability of any event can be elicited from the odds at which she would be prepared to bet for or against that event. The risk/uncertainty distinction has however never quite gone away and is currently under renewed theoretical scrutiny. The purpose of this article is to show that de Finetti’s understanding of the distinction is more nuanced than is usually admitted. Relying on usually overlooked excerpts of de Finetti’s works commenting on Keynes, Knight and interval valued probabilities, we argue that de Finetti suggested a relevant theoretical case for uncertainty to hold even when individuals are endowed with subjective probabilities. Indeed, de Finetti admitted that the distinction between risk and uncertainty is relevant when different individuals sensibly disagree about the probability of the occurrence of an event. We conclude that the received interpretation of de Finetti’s understanding of subjective probability needs to be qualified on this front

Identifying mechanisms influencing the emergence and success of innovation within national economies: a realist approach

This paper uses data from recent OECD (OECD Science, technology and industry scoreboard. OECD Publishing, Paris, 2013b) and Cornell University et al. (The global innovation index 2014. World Intellectual Property Organization, Fontainebleau, 2014) national innovation reports to explain Australia’s poor innovation performance. We adopt a realist approach and apply the technique of retroduction to identify potential causes. While our account is only preliminary, we contend that this technique provides the resources to uncover plausible causes for further, more detailed, causal analysis. We conclude that the retroductive method is one that can be applied to aggregated statistics more generally and could be used by analysts and policy makers in any jurisdiction

Updating "small world representations" in strategic decision-making under extreme uncertainty

The behavioral strategy literature investigates how decision makers might use Small World Representations (SWRs) to guide their actions in situations of extreme uncertainty, but says little about how such representations should be updated during the implementation phase. In this paper, we provide a framework to capture the relationship between SWRs, unknowns and Black Swans, and, drawing on the psychology of reasoning literature, explore different heuristic methods of inquiry that decision makers might use to update their SWRs. We compare the performance of two such methods⎯disconfirmation and counterfactual reasoning⎯in highly uncertain situations characterized by ambiguous and non-definite information. We find that counterfactual reasoning is superior to disconfirmation with respect to (1) counteracting the confirmation bias, (2) promoting the exploration of the scenario space, and (3) favoring the adoption of actions able to mitigate or exploit the consequences of Black Swans

Noncommutative Figa-Talamanca-Herz algebras for Schur multipliers

We introduce a noncommutative analogue of the Fig\'a-Talamanca-Herz algebra $A_p(G)$ on the natural predual of the operator space $\frak{M}_{p,cb}$ of completely bounded Schur multipliers on Schatten space $S_p$. We determine the isometric Schur multipliers and prove that the space $\frak{M}_{p}$ of bounded Schur multipliers on Schatten space $S_p$ is the closure in the weak operator topology of the span of isometric multipliers.Comment: 24 pages; corrected typo

Design Aspects on Winding of an MgB₂ Superconducting Generator Coil

AbstractGenerators based on superconducting rotor coils are considered for future large off-shore wind turbines for their low weight and compact design, and for their possibility to reduce costs. In the 10-20 K temperature range, MgB2 superconductors carry current densities 100 times higher than standard copper conductors at room temperature at one tenth of the wire cost per unit carried current. In the framework of the European project INNWIND.EU, an MgB2 superconducting generator pole will be designed, built and tested. Some of the design aspects of this work with emphasis on the winding process and associated coil insulation are discussed. An overall high current density in the coil is of crucial importance to obtain clear benefits compared to conventional solutions. The wire itself may be the most important parameter in that respect. However, the overall current density of the coil is also influenced by the thickness of the turn-to-turn electrical insulation. Here we discuss the impact of the insulation and suggest the use of a one-step winding process, employing wet-winding, where the applied epoxy also constitutes the insulation layer between turns. In this way the coil is densified by approximately 10% compared to the use of an additional, dedicated, electrical insulation like Kapton for wet-winding or glass-fibre for dry-winding followed by vacuum impregnation. We show the results of a trial winding of 500 m of MgB2 superconducting wire into a double pancake coil using the wet-winding technique. The coil is tested for contacts between the turns to evaluate the suggested one-step wet-winding process