The Regress of Uncertainty and the Forecasting Paradox

Nassim Nicholas Taleb and Pasquale Cirillo ()
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Nassim Nicholas Taleb: Maroun Semaan Faculty of Engineering and Architecture, American University of Beirut, Riad El-Solh, Beirut 1107 2020, Lebanon
Pasquale Cirillo: ZHAW School of Management and Law, Theaterstrasse 17, 8401 Winterthur, Switzerland

Risks, 2025, vol. 13, issue 12, 1-24

Abstract: We show that epistemic uncertainty–our iterated ignorance about our own ignorance–inevitably thickens statistical tails, even under perceived thin-tailed environments from past realizations. Any claim of precise risk carries a margin of error, and that margin itself is uncertain, in an infinite regress of doubt. This “errors-on-errors” mechanism rules out thin-tailed certainty: predictive laws must be heavier-tailed than their in-sample counterparts. The result is the Forecasting Paradox: the future is structurally more extreme than the past. This insight collapses branching scenarios into a single heavy-tailed forecast, with direct implications for risk management, scientific modeling, and AI safety.

Keywords: uncertainty; risk; risk management; forecasting; tails; machine learning; finance (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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