Frank Knight wrote the great book Risk, Uncertainty and Profit, in which he described the distinction between risk and uncertainty. (The book won second prize in a 1917 competition, sponsored by Hart, Schaffner and Marx, intended to “draw the attention of American youth to the study of economic and commercial subjects.” First prize was awarded to E.E. Lincoln, The Results of Municipal Electric Lighting in Massachusetts.) We are operating under risk if an event may or may not happen in the future, and we know the chances that it will happen. For example, flipping a fair coin is a game of risk. We do not know whether the coin will come up heads, but we know that the probability of this event is 1 out of 2, or 50%. An event is uncertain if it may or may not happen in the future, and we do not know the chances that it will happen. (Knight would require that we “cannot” know this chances that it will happen, though this is perhaps too strong; I have an excellent discussion of the do not know/cannot know issue, but this blog post is too small to contain it.) For example, I do not know whether McCain will win the next presidential election, and, unlike the situation with the coin, I also do not, and cannot, know the probability that he will win, because this election is a one-off event.
So what does this have to do with the new Batman movie, The Dark Knight? I have put the explanation after the jump, because it contains minor spoilers. (Or major spoilers, if you are totally unfamiliar with the Batman story.) Repeat: there are spoilers after the jump. Do not read the rest of this post if you do not want a few Dark Knight spoilers. Don’t! Seriously!