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Uncertainty
Introduction to the Topic
• Uncertainty is the reason for risk analysis. Risk analysis is
in a sense, the confluence of social values and science.
• A major purpose of risk analysis is to push risk assessors
and risk managers to be intentional in how they address
uncertainty in analysis and decision making.
• This chapter focuses on a conceptual way on the pile of
things we do not know. In order to know how best to
address the “things” we do not know, we must first
understand the nature of those things in the pile of
unknowns.
Separating Known From Unknowns
and Sorting Them Out
Output
Scenar Model
Knowl Criterio
ios and Domai
edge n
Theory n
Variabi Param
lity eter
Things
we
Index
know
Variabl Value
Models e Param
Natural eter
Variabi
lity
Things
we do Decisi
not on Define
know Quantit Variabl d
ies es Consta
nts
Empiri
cal
Quantit
ies
Levels of Uncertainty
• Uncertainty at the macro level affects values through
constantly and rapidly changing social environment.
• Uncertainty at the micro level occurs in the specific details
of the problems decision makers face, at the level of our
scientific knowledge.
• The two levels of uncertainty can pose markedly different
challenges to risk analysis
What is Knowledge Uncertainty
• Refers to uncertainty that results out of lacking or
incomplete information.
• Quantitative uncertainty analysis attempts to analyze and
describe the degree to which a calculated value may differ
from the true value.
• For analysis, probability distributions are used.
Basic Probability Concepts
• Probability is the chance that something will happen.
• Probabilities are expressed as fractions (1/4, 1/2,3/4) or
as decimals (0.25, 0.50, 0.75) between 0 and 1.
• When you assign a probability of 0, it would mean that
something can never happen
• When you assign a probability of 1, it would mean that
something will always happen.
Approaches to Probability
Classical Approach
• Classical probability defines the probability that an
event will occur as: