Considerable work has been done in formalizing Knightian or keynesian uncertainty. The formal basis has been laid by Schmeidler long back in the form of Choquet utility. Basically, decision makers facing uncertainty as opposed to risk maximize Choquest utlity rather than expected utlity . It leads to all sorts of interesting implications such as (1) why people prefer unindexed wage contracts (2) unindexed debt contracts (3) explanation of the failure of no trade theorem (4) too much trading (exubernce--super capacity) and too little trading (pessimism, subcapacity).

Paolo Ghirardato and Sujoy Mukerji are among the relatively younger peo-ple working on it.