Economics of the Unobserved Outcome: Unknown Futures, Present Control, and Markets for Nonexistent Problems

This paper examines a class of economic mechanisms in which representations of non-actual states become sufficient inputs to institutional processes that allocate actual resources. Two mechanisms are distinguished. First, an existing productive asset may be transferred in exchange for an equity claim whose quoted value depends partly on represented future outcomes. The paper distinguishes quoted valuation, liquidity, and money: a shareholding valued at a given amount is not equivalent to a monetary balance of the same amount, because realizing the quoted value requires an additional market transaction whose result may depend on liquidity, position size, and price impact. Nevertheless, the quoted valuation of such a claim may be sufficient to acquire control over an already existing productive asset. Second, resources may be allocated to solving a represented problem before the problem's originating event or process has been established. The paper distinguishes a future problem from a fictional problem: a future adverse state may not yet exist while its actual source already does, whereas a fictional problem may possess an economically effective representation without an established actual genesis. Economic activity generated around a problem — expenditure, firms, products, standards, or institutional structures — demonstrates the economic efficacy of its representation but does not by itself establish the ontological status of the represented problem. The common issue is therefore not uncertainty alone. It is the separation between the ontological status of a referent and the economic efficacy of its representation. The paper develops this distinction through the concepts of actual and epistemically available domains, verification lag, valuation–liquidity separation, and problem genesis. The resulting framework provides a way to analyze cases in which economically consequential representations concern outcomes that are not actual at the moment when resources are committed.