From Knightian to Keynesian uncertainty: contextualising Ellsberg’s ambiguity

Abstract

Abstract This paper argues that Daniel Ellsberg regarded the urn examples and conception of ambiguity presented in his famous 1961 paper as merely a step towards the analysis of more fundamental forms of uncertainty. Drawing on what is known about Ellsberg’s activities during the 1950s and early 1960s, it is shown that, after starting his project as one of reviving Frank Knight’s ideas about uncertainty, Ellsberg went on to realise that his position was in fact rather closer to that of John Maynard Keynes in his A Treatise on Probability. Furthermore, it is shown that formerly classified research Ellsberg undertook in the early 1960s also reveals an abiding influence in fundamental uncertainty.