TITLE:
Fighting Uncertainty with Uncertainty: A Baby Step
AUTHORS:
Ravi Kashyap
KEYWORDS:
Fight, Uncertainty, Social Science, Natural Science, Baby Step, Randoptimization
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.5,
August
14,
2017
ABSTRACT: We can overcome uncertainty with uncertainty. Using
randomness in our choices and in what we control, and hence in the decision making
process, we could potentially offset the uncertainty inherent in the
environment and yield better outcomes. The example we develop in greater detail
is the news-vendor inventory management problem with demand uncertainty. We
briefly discuss areas, where such an approach might be helpful, with the common
prescription, “Don’t Simply Optimize, Also Randomize; perhaps best described by
the term—Randoptimization”. 1) News-Vendor Inventory
Management; 2) School Admissions; 3) Journal Submissions; 4) Job Candidate
Selection; 5) Stock Picking; 6) Monetary Policy. This methodology is suitable
for the social sciences since the primary source of uncertainty is the members
of the system themselves and presently, no methods are known to fully determine
the outcomes in such an environment, which perhaps would require being able to
read the minds of everyone involved and to anticipate their actions
continuously. Admittedly, we are not qualified to recommend whether such an
approach is conducive for the natural sciences, unless perhaps, bounds can be
established on the levels of uncertainty in a system and it is shown
conclusively that a better understanding of the system and hence improved
decision making will not alter the outcomes.