The several masks of uncertainty

There are lately many comments about uncertainty. Becker in a WSJ op-ed argues that changing the rules of the game in a recession fuels uncertainty, which slows business even more. So the focus is here on regulatory uncertainty and the rationale is basically: "don't introduce more regulation, we don't know yet how it will impact on the economy". Livingston disagreed and provides data showing that what business cares about is too little demand, and not too much regulation.  This Economist's excellent post structures the debate about red tape and recession.

The entering the territory of uncertainty with regulations suggests a view on the function of institutions.  That demands a clarification, because uncertainty has many masks. In other words: Is the world uncertain because we don’t know enough yet or is the world uncertain because it is just how the world is? Regulatory uncertainty is epistemological uncertainty,  similar to Taleb's Black Swan. It however not the same than fundamental or ontological uncertainty, the kind of which Keynes had in mind. Ontological uncertainty is possible only in a transmutable or creative reality. As Davidson writes:  

This nonergodic concept of uncertainty (the ontological one) implies that the future is transmutable or creative in the sense that future economic outcomes may be permanently changed in nature and substance by today’s actions of individuals.

A clarification on uncertainty is necessary because institutions play a different role, regarding how we view uncertainty. In a world where uncertainty is quantifiable (risks)  institutions has not to be included in economic theory. The path of economic development is predetermined and human action and the social devices they design do not interfere with it. In the second type of economic reality, law and rules find a place so as to facilitate coordinations or reduce asymmetric information for example. By the same token, institutions can be seen as providing a deeper cognitive function only if we assume that uncertainty has an ontological nature.