State Decisions in the Face of Uncertainty
29 Pages Posted: 22 Aug 2001
The legal system encounters many problems in facing uncertainty. Neither does a particular theory exist of how to recognize and clarify situations of missing knowledge nor has an explicit theory been designed how to decide in such situations between possible alternatives of action. One reason for this obvious difficulty lies in the structure of law itself: It is aimed at providing stability, predictability and durability. Its mechanism is one of declaring a precise decision rule in a static environment. Situations of uncertainty cause these mechanisms to falter as missing knowledge and missing predictability do not allow for precision and determination.
The paper transfers insights from the economic perspective, especially the decision theory, into the legal understanding starting from the definition of Knightian risk and uncertainty as well as the concept of ignorance. Evolutionary approaches are sketched. Therefore, after portraying these differentiations, a particular decision-oriented definition of uncertainty versus risk is proposed that aims specifically at the legal context. Based on this, categories of several different types, origins and reasons of uncertainty are developed.
The paper then further studies in an overview the different mechanisms of how legislation could and should deal with uncertainty primarily generating knowledge and the conditions thereof. Here, again, economic concepts are described and transferred to the legal understanding. In a final step, the paper discusses possibilities of legal decision making based on economic and social propositions. A particular emphasis is laid on the concept of proportionality as understood in German public law.
Examples from the field of genetic engineering will illustrate the importance of including economic concepts into the legal approach to uncertainty.
JEL Classification: A12, D8, D81, K2, K23, O32, O33
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