Radical uncertainty

For a recent discussion of Austrian and neoclassical approaches to uncertainty, read Tyler Cowen’s post and follow the links.

Can economists make markets out of anything? How much knowledge do you need to to build a calculative device? Do you need Bayesian priors to create trade? Or can you create markets de novo?

Arnold Kling says:

I think that we will not see contingent claims markets emerge in the case of unknown unknowns, because the bets are too hard to define. If you can define a bet, then you have created a known unknown. If you cannot define a bet, you have an unknown unknown.

Do economists transform untradable unknown unknowns into tradable known unknowns?

It makes me go “Hmmm”.