Uncertainty…Round 2

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)

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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.

To refresh, click here on my post on uncertainty.

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.

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3 responses to “Uncertainty…Round 2

  1. It’s funny because I still think this post suffers from the states versus markets framing in some ways (it’s incredibly pervasive and I have not fully escaped).

    You speak as if ‘the government’ cannot ‘reduce uncertainty’ with its policies. But this is a relatively superficial treatment of the concept. It’s not about the government waving a wand with its policies and reducing uncertainty itself; policies like safety nets, limited liability laws, automatic freezes when a share falls to much, and so forth, can protect people from the downsides of uncertainty and hence help reduce its impact when they are making decisions, because they are better protected.

    • I plan to do a part 3 to respond to LK ( I am quite busy so I probably won’t get started until next week. )

      But I don’t see me getting into the market vs state thing. I see that it is the combination of both to give us the ontological uncertain market that we see exist. Which is why I said that it is difficult for me to believe one rejecting this mentality but at the same time say more government intervention reduces uncertainty. Shackle, for one, did not believe that government intervention in itself reduced uncertainty. He made it quite clear in his book: The Years of High Theory that no amount of institutional organizations or legislation gets us away from the problem of uncertainty. This was the fundamental principle that Keynes started, and Shackle of course expanded. Each step we take is still a step into the void as Shackle would say.

      I feel that it is the post Keynesians that fall into the state vs market mentality, instead the pks favor the state side. They fail to acknowledge that the uncertainty problem is in fact everywhere and not just on the unhampered market. They, on one hand, talk perfectly about the dangers of using historical data to predict the future and thus reject a predictive state but fail to see how that applies to policy as well. They speak perfectly about the flaw to assume how increase knowledge means reducing uncertainty because data is changing and we don’t know the ‘amount’ of data to even make such a statement but fail to see how this applies to government policies into the market. It’s almost like the pks are implying that reality is not predetermined, thus we should be skeptical of data for historical data does not imply that we know anything about future states but once there is a sufficient amount of intervention in the market there can be such a predictive state and thus, it might be reliable to use historical data for a good source to determine future states.

      To me, I don’t see how this follows. The problem of uncertainty is still with us. This seems close as an example of special pleading in which uncertainty is applied in markets and not on the state.

      Lastly, I understand government just doesn’t wave a wand and says, ” we fixed uncertainty,” if only that was the case, but the question to ask is “how does government limit uncertainty. What tools and data do they use to interpret the results?” Well if we hold to the three things of the realities of uncertainty (ontological uncertainty, non ergodic, transmutable reality ) should we still question the tools and data that we interpret? Why isn’t historical data looked with skepticism like what we did when talking about markets and reality? Why is it alright to now say that governments reduce uncertainty when data is still constantly changing, when the future remains to be written by the human actions we do in the present, and when each step is a step into the void ? Shackle’s work on uncertainty, which much of Davidson’s work is based off of, was meant to describe reality as a whole, not simply just markets.

      I’ll have more to say whenever I get a chance to post and explain a little better, I am typing this on my phone so I just hit some points

      Regards

  2. Pingback: Uncertainty Part 3: A Response to Lord Keynes and Unlearningecon | The Radical Subjectivist

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