People inherently understand risk. Would you jump from one rooftop to another? I wouldn’t because its risky. Risk is a concept that puts a measure on the probability of certain outcomes, normally with negative connotations, for instance ‘we risk winning everything’ is less likely than hearing ‘we risk losing everything’.
Uncertainty and risk are related but not one in the same, for instance you can be uncertain as to who will win a football match, but it poses no risk (unless you have bet on the game!). Uncertainty can also have upward effects, for instance house prices in the future were uncertain in 1998 from that point until 2006 they rose, from 2006 to present they have fallen. It is still uncertain where prices will end up. The ‘risk’ however of buying in 1998 is almost non-existent whereas the ‘risk’ of those who bought in 2006 is very tangible, many of these people are in negative equity. What they have witnessed is ‘Economic Risk’.
