Lets start this post with a Lachmann passage on Keynes and subjectivism:
We have emphasized the importance of expectations for the subjectivist view of action. It is well known that in the General Theory, Keynes’s main aim was to establish the possibility of unemployment equilibrium and that everything else he had to say was made to serve this purpose. The introduction of expectations was thus to him a means to an end. He brought them into his argument when it suited him and left them out when it did not. (emphasis mine)
Keynes_Follower states the following
I may have a possible response to this uncertainty problem. The market itself is uncertain, we both agree, but government does reduce uncertainty because it has intervening factors that we know and that said, it does not apply to the uncertain problem like that of the markets at least.
But to answer: In a world of ontological uncertainty, non ergodicity, and transmutability, how can we have Post Keynesians say for certain that government reduces uncertainty? Just because the market is instable, unpredictable, and uncertain does not follow that government policies in trying to reduce the consequences to these thing suit any better. And it does not follow that these same policies overcome uncertainty. Again to state that ‘Government reduces uncertainty’ is like saying ‘increase of knowledge reduces uncertainty’.
This problem is even more of a problem if one rejects the ‘state vs market’ mentality, which many Post Keynesians agree to reject this mentality. This is to say, one cannot say the uncertainty problem solely applies on markets and also reject the ‘state vs market’ mentality. But even setting aside this ‘state vs market’ mentality, policies still influence the market process, and thus it still follows that the market still deals with the exact same problem than without the policies, it still deals with ontological uncertainty, non ergodicity, and transmutability.
It seems like the followers of Keynes have fallen into that same problem as Keynes but in a somewhat different context. Post Keynesian literature and research on uncertainty, while really great stuff, is only a means to an end. They use it when it suits them and leave it out when it doesn’t… Or so it currently seems.
And on a side note, this is not a critique specifically towards Post Keynesians, though I am ‘picking’ on the Post Keynesians (if you will) because of the great literature on uncertainty they have on markets. This critique really applies to all economic theories. If we want to have more realistic explanations about the economy and economics then we must be willing to take uncertainty to the next level and apply it to everything that is involved in the market process. Again, my conclusion that I drew up from my original post on uncertainty was as follows:
By applying all that has been said to economic theories and policies are key if we wish for economics, as a subject, to progress. Davidson is really spot on, on what he has to say about uncertainty and he does a very good job at explaining uncertainty in depth. Nevertheless, this puts in question all theory that asks for both positive and negative regulation.