When we think of our future, no matter how well we plan, we know it could turn out differently to how we imagined it. But we don’t know how different it could be. This introduces a whole different level of insecurity, one that not only makes us feel fairly uncomfortable, but is also more difficult to grasp and conceptualize mathematically.
While someone might say, "We can’t know what we don’t know, so why should we even try to understand this ambiguity," the economist Lars Peter Hansen, has not shied away from this question. He acknowledged the pervasiveness of uncertainty in all aspects of our lives, particularly with regard to economic activity, and has pushed this incredibly complex and challenging matter to the forefront of economic modeling.