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Uncertainty is generally assumed to have negative economic effects, but they are difficult to quantify due to measurement and definitional issues in the real world. We use a carefully controlled laboratory experiment to examine policy uncertainty and its impact on economic efficiency. We employ a double-auction design and compare the efficiency of a market with a known tax to that of a risky tax (of known probability) and an uncertain tax (of unknown probability). We find that the uncertain tax generates more deadweight loss than a risky tax of equal expected value.