by Keynes and Knight famously simultaneously in 1921 identified the concept of fundamental uncerainty as a situation not understandable by using a probability distribution, an idea popularized by Nassim Taleb just as the 2008 crash happened as a "black swan." Taleb defined white swans as situations describably by Gaussian normal distributions. For situations not full uncertainty or white swans Taleb coined the idea of "grey swans," situations exhibiting "fat tails" and more generally lots of extreme outcomes, but yet possibly describable by probability distributions allowing more readily extreme outcomes.I think this is what we are dealing with, although I claim no special expertise here. Indeed, for me the issue is whether or not this current pandemic actually a black swan of fundamental
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I think this is what we are dealing with, although I claim no special expertise here. Indeed, for me the issue is whether or not this current pandemic actually a black swan of fundamental uncertainty rather than "just" a very grey swan. The reason it is the latter, despite the highly unusual outcomes on both health and economic outcomes, is that large numbers of experts have been warning for several years that we were facing with high probability a serious pandemic. The current administration has in fact been officially faced scenarios not all that different from what has happened. Among those is a largely ignored study in the president's own Economic Report for last year, where economists at the largely ignored CEA made such a study. But, heck, who in this administration reads the Economic Report of the President, hahhahah!?
So, beyond my wisecracks, a very hard fact is that we do not yet really understand the statistical dynamics of this particular virus. There is a lot more unexplained noise going on, which manifests itself at a superficial level in the wildly changing official projections of what is to come. To pick the greatest extremes, at one point our POTUS declared that while there were 15 cases in the US, this number would soon go to zero, but than not all that long later same individual at one point suggested, based on a model, that deaths in the US could be in the millions. But those numbers hae since been cut way back. But since then we have seen these forecasted numbers going all over the place.
In any case, I am struck by how much bizarre noise there is in all this. So to get personal where I live, Harrisonburg, VA is a hotspot: with a 50,000 population we have 485 cases and over 20 deaths. A city 25 miles to the southwest I once lived in and only slightly smaller, Staunton, has a whopping 14 cases and zero deaths so far. I can think of many similar cases. Why has Greece had very few cases while fellow Med nations Italy and Spain have been among the hardest hit on the planet?
I think it was Einstein who said that the more we know, the more we understand how little we know.
Barkley Rosser