11/27/2019 Frank Knight | Grand Strategy: The View from Oregon

Grand Strategy: The View from Oregon

Grand strategy and geopolitics from the perspective of the Pacific Northwest

Addendum on the Retrodiction Wall

26 October 2013

Saturday

(https://geopolicraticus.files.wordpress.com/2010/04/past-and-future.jpg)

In my last post, The Retrodiction Wall (https://geopolicraticus.wordpress.com/2013/10/23/the-

retrodiction-wall/), I introduced several ideas that I think were novel, among them:

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● A retrodiction wall, complementary to the prediction wall, but in the past rather than the present

● A period of effective history lying between the retrodiction wall in the past and the prediction wall in
the future; beyond the retrodiction and prediction walls lies inaccessible history that is not a part of
effective history

● A distinction between diachronic and synchronic prediction walls, that is to say, a distinction
between the prediction of succession and the prediction of interaction

● A distinction between diachronic and synchronic retrodiction walls, that is to say, a distinction
between the retrodiction of succession and the retrodiction of interaction

I also implicitly formulated a principle, though I didn’t give it any name, parallel to Einstein’s principle
(also without a name) that mathematical certainty and applicability stand in inverse proportion to each
other: historical predictability and historical relevance stand in inverse proportion to each other. When I
can think of a good name for this I’ll return to this idea. For the moment, I want to focus on the
prediction wall and the retrodiction wall as the boundaries of effective history.

(https://geopolicraticus.files.wordpress.com/2013/10/past-and-future-with-walls.png)
The retrodiction wall in the past and the prediction wall in the future mask inaccessible portions of
history from us.

In The Retrodiction Wall (https://geopolicraticus.wordpress.com/2013/10/23/the-retrodiction-wall/)

I made the assertion that, “Effective history is not fixed for all time, but expands and contracts as a
function of our knowledge.” An increase in knowledge allows us to push the boundaries the prediction
and retrodiction walls outward, as a diminution of knowledge means the contraction of prediction and
retrodiction boundaries of effective history.

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(https://geopolicraticus.wordpress.com/2013/04/23/addendum-on-existential-risk-and-existential-
uncertainty/)

We can go farther than this is we interpolate a more subtle and sophisticated conception of knowledge
and prediction, and we can find this more subtle and sophisticated understand in the work of Frank
Knight (http://www.econlib.org/library/Enc/bios/Knight.html), which I previously cited in
Existential Risk and Existential Uncertainty
(https://geopolicraticus.wordpress.com/2013/03/06/existential-risk-and-existential-uncertainty/).
Knight made a tripartite distinction between prediction (or certainty), risk, and uncertainty. Here is the
passage from Knight that I quoted in Addendum on Existential Risk and Existential Uncertainty
(https://geopolicraticus.wordpress.com/2013/04/23/addendum-on-existential-risk-and-existential-
uncertainty/):

1. A priori probability. Absolutely homogeneous classification of instances completely identical except

for really indeterminate factors. This judgment of probability is on the same logical plane as the
propositions of mathematics (which also may be viewed, and are viewed by the writer, as “ultimately”
inductions from experience).

2. Statistical probability. Empirical evaluation of the frequency of association between predicates, not
analyzable into varying combinations of equally probable alternatives. It must be emphasized that any
high degree of confidence that the proportions found in the past will hold in the future is still based on
an a priori judgment of indeterminateness. Two complications are to be kept separate: first, the
impossibility of eliminating all factors not really indeterminate; and, second, the impossibility of
enumerating the equally probable alternatives involved and determining their mode of combination so
as to evaluate the probability by a priori calculation. The main distinguishing characteristic of this type is
that it rests on an empirical classification of instances.

3. Estimates. The distinction here is that there is no valid basis of any kind for classifying instances. This
form of probability is involved in the greatest logical difficulties of all, and no very satisfactory
discussion of it can be given, but its distinction from the other types must be emphasized and some of its
complicated relations indicated.

Frank Knight, Risk, Uncertainty, and Profit (http://www.econlib.org/library/Knight/knRUP.html),

Chap. VII
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This passage from Knight’s book (as the entire book) is concerned with applications to economics, but
the kernel of Knight’s idea can be generalized beyond economics to generally represent different stages
in the acquisition of knowledge: Knight’s a priori probability corresponds to certainty, or that which is so
exhaustively known that it can be predicted with precision; Knight’s statistical probably corresponds with
risk, or partial and incomplete knowledge, or that region of human knowledge where the known and
unknown overlap; Knight’s estimates correspond to unknowns or uncertainty.

(https://geopolicraticus.files.wordpress.com/2013/10/epistemic-continuum.png)
Frank Knight’s tripartite distinction among certainty, risk, and uncertainty can be employed in a
decomposition of the epistemic continuum into the knowable, the partially knowable, and the
unknowable.

Knight formulates his tripartite distinction between certainty, risk, and uncertainty exclusively in the
context of prediction, and just as Knight’s results can be generalized beyond economics, so too Knight’s
distinction can be generalized beyond prediction to also embrace retrodiction. In The Retrodiction Wall
(https://geopolicraticus.wordpress.com/2013/10/23/the-retrodiction-wall/) I generalized John Smart
(http://www.accelerationwatch.com/bio_johnsmart.html)‘s exposition of a prediction wall
(http://www.accelerating.org/articles/consideringsingularity.html) in the future to include a
retrodiction wall in the past, both of which together define the boundaries of effective history. These two
generalizations can be brought together.

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(https://geopolicraticus.files.wordpress.com/2013/10/effective-history-2.png)
Effective history lies between the brick walls of prediction and retrodiction.

A prediction wall in the future or a retrodiction wall in the past are, as I noted, functions of knowledge.
That means we can understand this “boundary” not merely as a threshold that is crossed, but also as an
epistemic continuum that stretches from the completely unknown (the inaccessible past or future that
lies utterly beyond the retrodiction or prediction wall) through an epistemic region of prediction risk or
retrodiction risk (where predictions or retrodictions can be made, but are subject to at least as many
uncertainties as certainties), to the completely known, in so far as anything can be completely known to
human beings, and therefore well understood by us and readily predictable.

(https://geopolicraticus.files.wordpress.com/2013/10/effective-history-3.png)
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If we open up the prediction wall or the retrodiction wall and allow them to be thick, we can interpolate
Knight’s tripartite epistemic continuum into both the boundary of future knowledge and the boundary
of past knowledge.

Introducing and integrating distinctions between prediction and retrodiction walls, and among
prediction, risk and uncertainty gives a much more sophisticated and therefore epistemically satisfying
structure to our knowledge and how it is contextualized in the human condition. The fact that we find
ourselves, in medias res, living in a world that we must struggle to understand, and that this
understanding is an acquisition of knowledge that takes place in time, which is asymmetrical as regards
the past and future, are important features of how we engage with the world.

This process of making our model of knowledge more realistic by incorporating distinctions and
refinements is not yet finished (nor is it ever likely to be). For example, the unnamed principle alluded to
above — that of the inverse relation between historical predictability and relevance, suggests that the
prediction and retrodiction walls can be penetrated unevenly, and that our knowledge of the past and
future is not consistent across space and time, but varies considerably. An inquiry that could
demonstrate this in any systematic and schematic way would be more complicated than the above, so I
will leave this for another day.

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Filed in Futurism, Prehistory, Strictly Theoretical ·Tags: certainty, Frank Knight, John Smart, Knightian
risk, prediction, prediction wall, retrodiction, retrodiction wall, risk
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Addendum on Existential Risk and Existential Uncertainty

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23 April 2013

Tuesday

(https://geopolicraticus.files.wordpress.com/2012/10/earth-moon-system.jpg)
Earth and the moon in one frame as seen from the Galileo spacecraft 6.2 million kilometers away. (from
Picture of Earth from Space by Fraser Cain)

In my post Existential Risk and Existential Uncertainty

(https://geopolicraticus.wordpress.com/2013/03/06/existential-risk-and-existential-uncertainty/) I
cited Frank Knight’s distinction between risk and certainty and attempted to apply this to the idea of
existential risk. I suggested that discussions of existential risk ought to distinguish between existential
risk (sensu stricto) and existential uncertainty.

In Knight’s now-classic work Risk, Uncertainty, and Profit, Frank Knight actually made a threefold
distinction in the kinds of probabilities that face the entrepreneur:

1. A priori probability. Absolutely homogeneous classification of instances completely identical except

for really indeterminate factors. This judgment of probability is on the same logical plane as the
propositions of mathematics (which also may be viewed, and are viewed by the writer, as “ultimately”
inductions from experience).

2. Statistical probability. Empirical evaluation of the frequency of association between predicates, not
analyzable into varying combinations of equally probable alternatives. It must be emphasized that any
high degree of confidence that the proportions found in the past will hold in the future is still based on
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an a priori judgment of indeterminateness. Two complications are to be kept separate: first, the
impossibility of eliminating all factors not really indeterminate; and, second, the impossibility of
enumerating the equally probable alternatives involved and determining their mode of combination so
as to evaluate the probability by a priori calculation. The main distinguishing characteristic of this type is
that it rests on an empirical classification of instances.

3. Estimates. The distinction here is that there is no valid basis of any kind for classifying instances. This
form of probability is involved in the greatest logical difficulties of all, and no very satisfactory
discussion of it can be given, but its distinction from the other types must be emphasized and some of its
complicated relations indicated.

Frank Knight, Risk, Uncertainty, and Profit, Chap. VII

At the end of the chapter Knight finally made his point fully explicit:

It is this third type of probability or uncertainty which has been neglected in economic theory, and which
we propose to put in its rightful place. As we have repeatedly pointed out, an uncertainty which can by
any method be reduced to an objective, quantitatively determinate probability, can be reduced to
complete certainty by grouping cases. The business world has evolved several organization devices for
effectuating this consolidation, with the result that when the technique of business organization is fairly
developed, measurable uncertainties do not introduce into business any uncertainty whatever. Later in
our study we shall glance hurriedly at some of these organization expedients, which are the only
economic effect of uncertainty in the probability sense; but the present and more important task is to
follow out the consequences of that higher form of uncertainty not susceptible to measurement and
hence to elimination. It is this true uncertainty which by preventing the theoretically perfect outworking
of the tendencies of competition gives the characteristic form of “enterprise” to economic organization as
a whole and accounts for the peculiar income of the entrepreneur.

Frank Knight, Risk, Uncertainty, and Profit, Chap. VII

Knight’s distinction between risk and uncertainty — between probabilities that can be calculated,
managed, and insured against and probabilities that cannot be calculated and therefore cannot be
managed or insured against — continues to be taught in business and economics today. (It is a
distinction closely parallel to Rumsfeld’s distinction between known unknowns and unknown
unknowns, though worked out in considerably greater detail and sophistication.) Knight’s slightly more
subtle threefold distinction among probabilities might be characterized as a tripartite distinction
between certainty, risk, and uncertainty.

Knight acknowledges, in his account of statistical probability, i.e., risk, that there are at least two
complications:

1. that of eliminating all truly indeterminate features, and…

2. the impossibility of enumerating the equally probable alternatives involved

Knight’s hedged account of risk obliquely acknowledges the gray area that lies between risk and
uncertainty — a gray area that can be enlarged in favor of risk as our knowledge improves, or which can
be enlarged in favor of uncertainty as additional complicating favors enter into our calculation of risk
and render our knowledge less effective and our uncertainty all the greater. That is to say, the line
between risk and uncertainty is unclear, and it can move, which makes it doubly ambiguous.

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(https://geopolicraticus.files.wordpress.com/2013/04/certainty-risk-uncertainty1.gif)

These hedges are important qualifications to make, because we all know from real-life experience that
additional complicating factors always enter into actual risks. We may try to insure ourselves, and
therefore to secure our interests against risk, but fine print in the insurance contract may deny us a
settlement, or we may have forgotten to pay our premiums, or a thousand other things might go wrong
between our careful planning and the actual events of life that so often preempt our planning and force
us to deal with the unexpected with insufficient preparation. As Bobby Burns put it, “The best laid schemes
o’ Mice an’ Men, Gang aft agley, An’ lea’e us nought but grief an’ pain, For promis’d joy!”

(https://geopolicraticus.files.wordpress.com/2013/04/field_mouse-small.gif)

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Such consideration span the entire universe from field mice to galaxies. A coldly rational assessment of
risk can be made, and resources can be expended to mitigate risk to the extent calculated, but not only
are the limits to our knowledge, but we don’t know where the limits to our knowledge lie. Indeterminate
features can creep into our calculation and equally probable alternatives could be in play without our
even being aware of the fact.

Some events that pose existential risks or global catastrophic risks can be predicted with a high degree of
accuracy, and some cannot. Even about those risks that seem predictable to a high degree of accuracy —
say, the life of the sun, which can be predicted on the basis of our knowledge of cosmology, and which
thereby would seem to give us some knowledge of how long a time we have on earth to lay our schemes
— admit of indeterminate elements and equally probably scenarios. The end of the earth seems a long
way off, if the earth lasts almost as long as the sun, and putting our existential risk far in the future
seems to diminish the threat.

There is a famous quote from Frank Ramsey (who died tragically young in a mountain climbing
accident, as might happen to anyone, anytime) that is relevant here, both economically and
philosophically:

My picture of the world is drawn in perspective and not like a model to scale. The foreground is
occupied by human beings and the stars are all as small as three-penny bits. I don’t really believe in
astronomy, except as a complicated description of part of the course of human and possibly animal
sensation. I apply my perspective not merely to space but also to time. In time the world will cool and
everything will die; but that is a long time off still and its present value at compound discount is almost
nothing.

From a paper read to the Apostles, a Cambridge discussion society (1925). In ‘The Foundations of
Mathematics’ (1925), collected in Frank Plumpton Ramsey and D. H. Mellor (ed.), Philosophical
Papers (1990), Epilogue, 249

Despite Ramsey having referred (in another context) to the “Bolshevik menace” of Brouwer
(https://geopolicraticus.wordpress.com/2012/10/14/one-hundred-years-of-intuitionism-and-
formalism/) and Weyl (https://geopolicraticus.wordpress.com/2012/03/25/in-what-style-should-we-
think/), it has been said that Ramsey became a constructivist
(http://geopolicraticus.tumblr.com/post/47435815820/constructivism-without-constructivism) not
long before he died. This conversion should not surprise us, given Ramsey’s Protagorean profession in
his passage.

Protagoras famously said that Man is the measure of all things, of those things that are, that they are, and of
those things that are not, that they are not. (πάντων χρημάτων μέτρον ἐστὶν ἄνθρωπος, τῶν μὲν ὄντων
ὡς ἔστιν, τῶν δὲ οὐκ ὄντων ὡς οὐκ ἔστιν.) Protagoras may be counted as the earliest of proto-
constructivists (http://geopolicraticus.tumblr.com/post/18656414384/kantian-non-constructivism), of
which company Kant and Poincaré may be considered the most famous.

In the passage quoted above, Ramsey is essentially saying in a modern idiom that man is the measure of
all things, even of time and space — that man is the measure of the farthest reaches of time and space,
and in so far as these distant prospects of human experience are inaccessible, they are irrelevant. Ramsey
is important in his respect because of his consciously chosen anthropocentrism. In a post-Copernican
age, this is significant. We are all, of course, familiar with the advocates of the anthropic cosmological
principle, and their implicit anthropocentrism, but Ramsey gives us a slightly different perspective on
anthropocentrism. Ramsey essentially brings constructivism to our moral life, and in so doing suggests
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that the moral imperatives posed by existential risk

(https://geopolicraticus.wordpress.com/2013/02/25/moral-imperatives-posed-by-existential-risk/)
can be safely ignored for the time being.

What Ramsey is saying here is that we can make a definite calculation of the lives of the stars — and also
the expected life of our sun — and that we can insure against this risk, but that the risk lies so far in the
future that its present value is practically nil. In other words, the eventual burning out of the sun is a risk
and not an uncertainty. On the contrary, it is not an uncertainty at all, but a certainty. Just as the finite
amount of oil on Earth must eventually come to an end, the finite sun must also come to an end.

What our growing knowledge of cosmology is teaching us is that we are not isolated from the wider
universe. Events on a cosmic scale have influenced the development of life on earth, and may well be
responsible for our development as a species. If the earth had not been hit by an asteroid or comet about
65 million years ago, mammals may never have developed as they did, and we would not exist. And if
our solar system did not bob up and down through the galactic plane of the Milky Way, resulting in
geophysical rhythms from the the gravitational interaction with the rest of the galaxy, a distant asteroid
of comet might not have been dislodged from its stable orbit and sent careening toward earth.

Given our connection with the wider universe, and our vulnerability to its convulsions, what we know
about our local risks (which is not nearly enough, as recent unpredicted episodes have shown us) is not
enough to make a calculation of our vulnerability. What appears superficially to be a calculable risk has
uncertainty injected back into it by the cosmological context in which all astronomical events take place.

If the death of the sun were the only existential risk against which we needed to insure ourselves, we
would not need to be in any hurry about existential risk mitigation, because we would have literally
millions of years to build a spacefaring civilization and thus to insure ourselves against that predictable
catastrophe. But in our violent universe (as Nigel Calder called it) scarcely a million years goes by
without some cosmic catastrophe occurring, and we don’t know when then next one will arrive.

Carl Sagan rightly pointed out that an event that is unlikely to happen in a hundred years may be
inevitable in a hundred millions years:

The Earth is a lovely and more or less placid place. Things change, but slowly. We can lead a full life and
never personally encounter a natural disaster more violent than a storm. And so we become complacent,
relaxed, unconcerned. But in the history of Nature, the record is clear. Worlds have been devastated.
Even we humans have achieved the dubious technical distinction of being able to make our own
disasters, both intentional and inadvertent. On the landscapes of other planets where the records of the
past have been preserved, there is abundant evidence of major catastrophes. It is all a matter of time
scale. An event that would be unthinkable in a hundred years may be inevitable in a hundred million.

Carl Sagan, Cosmos, Chapter IV, “Heaven and Hell”

Perhaps in one of his most quoted lines, Sagan said that we are “star stuff,” and certainly this is true.
However, the corollary of this inspiring thought is that our star stuff is subject to the natural forces that
shape the destinies of stars, and in shaping the destiny of stars, shape the destiny of men who live on
planets orbiting stars.

Understanding ourselves as “star stuff” entails understanding ourselves as living in a dangerous

universe replete with devouring black holes, gamma ray bursts, supernovae, and other cataclysms
almost beyond the capacity of human beings to conceive.

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Filed in Economics, Futurism ·Tags: Carl Sagan, existential risk, Frank Knight, Frank Ramsey,
Protragoras, risk, uncertainty
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