Analysis of Uncertainty as Opposed to Risk: An Experimental Approach

The paper mustrates the scope for enhancing the conceptual apparatus used by agricultural economists to analyse decision-making under conditions of uncertainty. Selected empirical results from experiments on student subjects from three universities are reported. Three issues are considered. First, the reasons for choice and the understanding of a choice problem are examined. Second, attitudes towards different levels of uncertainty are measured. Third, the possibility that apparently non-normative psychological factors influence choice is explored. The paper serves to illustrate and support a number of methodological points. The major points are that a risk-uncertainty distinction is useful (contrary to the aging conventional wisdom of economic theory), that laboratory experiments can potentially provide data of use to agricultural economists, and that predictive models of choice under uncertainty may be more accurate if they take account of psychological variables which influence the decision-making processes of human subjects.