Is Risk Quantifiable?

  • Sami Al-SuwailemEmail author
  • Francisco A. Doria
  • Mahmoud Kamel
Conference paper
Part of the Springer Proceedings in Complexity book series (SPCOM)


The work of Gödel and Turing, among others, shows that there are fundamental limits to the possibility of formal quantification of natural and social phenomena . Both our knowledge and our ignorance are, to a large extent, not amenable to quantification. Disregard of these limits in the economic sphere might lead to underestimation of risk and, consequently, to excessive risk-taking. If so, this would expose markets to undue instability and turbulence. One major lesson of the Global Financial Crisis, therefore, is to reform economic methodology to expand beyond formal reasoning.


Financial instability Gödel’s incompleteness theorem Irreducible uncertainty Lucas critique Mispricing risk Quantifiability of risk Reflexivity Rice’s theorem Self-reference 



We are grateful to the editors and an anonymous referee for constructive comments and suggestions that greatly improved the readability of this text. FAD: wishes to acknowledge research grant no. 4339819902073398 from CNPq/Brazil, and the support of the Production Engineering Program, coppe/UFRJ, Brazil. SA: wishes to acknowledge the valuable discussions with the co-authors, particularly FAD. The views expressed in this chapter do not necessarily represent the views of the Islamic Development Bank Group.


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Copyright information

© Springer Nature Switzerland AG 2018

Authors and Affiliations

  • Sami Al-Suwailem
    • 1
    Email author
  • Francisco A. Doria
    • 2
  • Mahmoud Kamel
    • 3
  1. 1.Islamic Development Bank GroupJeddahSaudi Arabia
  2. 2.Advanced Studies Research GroupPEP/COPPE, Federal University at Rio de JaneiroRio de JaneiroBrazil
  3. 3.College of Computer ScienceKing Abdul-Aziz UniversityJeddahSaudi Arabia

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