UC Davis economist, wearing glasses and mustache, bookshelves behind nim
Burkhard Schipper, professor of economics (courtesy photo)

Economist Receives Army Grant to Apply Game Theory to ‘Unknown Unknowns’

“There are known knowns — there are things we know we know. We also know there are known unknowns — that is to say, we know there are some things we do not know. But there are also unknown unknowns, the ones we don’t know we don’t know.”

Twenty years after then-U.S. Secretary of Defense Donald Rumsfeld made that famous statement distinguishing categories of unawareness, a UC Davis economist is developing a logic for analyzing the most unpredictable kind — the “unknown unknowns.”

Burkhard Schipper, a professor of economics and an affiliated faculty member of the Graduate Group of Applied Mathematics at UC Davis, recently received a $427,000 grant from the Army Research Officea directorate of the U.S. Army Combat Capabilities Development Command Army Research Laboratory, for his project “Interactive Reasoning in Games with Awareness of Unawareness.”   

“Awareness of unawareness — the unknown unknowns — is an issue across the entire Army echelon in both tactical and strategic decisions,” Schipper said. 

“In many situations we are not just uncertain, but we may even not conceive of all contingencies that might turn out to be relevant,” he said. “For years, we were not able to study such situations systematically because no math was developed for it. I developed a logic for it with which we can analyze such situations and apply it to decision-making.”

Schipper said his project focuses on a logic that is computable and, as a result, may be used someday for sophisticated artificial intelligence that can deal with unknown unknowns.

Possible future applications could range from battlefield robots to the design of contracts and institutions. The logic could help decision-makers determine “how to design procurement contracts such that unknown unknowns are discovered as much as possible, the contract is awarded to the best supplier, and the Department of Defense and taxpayers are not taken to the cleaners,” Schipper said.

Economics was instrumental in developing game theory, the math of strategic interaction, he said.

“We wanted to model unknown unknowns, but we were not able to because the very logical foundations of game theory couldn’t handle it,” Schipper said. “That’s why we first had to develop the logical foundations and now we can apply it to game theory. In turn, we can apply game theory with unknown unknowns to economic problems like procurement contracts with unknown unknowns.”

— Kathleen Holder, content strategist in the UC Davis College of Letters and Science

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