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 III. Risk and Uncertainty in the Context of Subsistence Agriculture



A. The Causes of Risk and the Sources of Uncertainty



 The basic conceptual distinction between "risk" and "uncertainty" owes its

origins to Frank H. Knight [1921] where he set forth the notion that "measurable

uncertainty" to which one can assign numerical probabilities should be called

"risk" and that true "uncertainty" is where numerical probabilities can not be

applied. Knight's pioneering efforts have spawned a sustained debate on the

further refinements of the distinction, on the determinateness of the probabili-

ties, on questions of ambiguity, and on similar issues.

 Rather than attempt to cope with the very extensive issues and arguments in

 the literature on the validity of the distinction between the two concerts, I

 would like to refine the precise content of these two concepts for the subsis-
 1/
 tence farmer as decision-maker. Thus far, the arguments in the literature

 have revolved around a distinction which focuses upon the ignorance of the

 decision-maker as to the statistical frequencies of events related to his de-

 cision. The assumption in most cases of "uncertainty" is that the decision-

 maker can not assign a priori calculations to determine the probabilities or

 where the relevant anticipated events are considered to be unique or of the

 'once-and'for-all' variety.

 The two basic

 distinctions which are relevant for the decision-making framework of the sub-

 sistence farmer are (a) those future events to which he can assign probabilities


 1/
 Despite the extensive debate on the point, I will assume throughout this
 paper that peasant farmers behae rationally [Wise and Yotopoulos, 1968] and are
 utility maximizers. The critical question then becomes the content of the
 objective function and the relative weights assigned, especially to such
 elements as profits (net returns) or security or social prestige.