I was reading some amazon reviews and comments and I ended up seeing Michael Brady’s comments on Shackle.
What funny is that it seems like Brady has the same interpretation of Shackle as I do. In short, if we live in a world were it is ontological uncertain, in which past data says nothing about future states and thus we should be skeptical of viewing past data as something to use for predicting future states. But this ontological uncertainty also applies to government policy as well. Post Keynesians have this mentality that, yes , we do live in a world like that as Shackle describes, but given a sufficient amount of intervention, we may be able to see past data as reliable to tell us something about future states. This is to say, that somehow, government reduces uncertainty, even in a world that is ontological uncertain.
But, again, Brady sees Shackle as I do, but concludes that this position leads to nihilism. Brady takes it a step further and implies that if post Keynesians were to take Shackle’s ontological world seriously, they themselves would be nihilists as well. As Brady puts it:
.The Post Keynesian school is doomed intellectually because it does not have a solid foundation to deal with uncertainty as a range.Radical uncertainty only has import in decisions involving innovation/long run capital investment.Any attempt to put it at the center of decision making leads to intellectual chaos.
From a radical subjectivist point of view the above passage is more positive than negative. Most economic schools are doomed to fail because they don’t have a satisfactory theory of ontological uncertainty, but like I have said, this does not mean that we won’t get there, in fact I strongly believe that we will get there with more emphasis and research on micro foundations. This is something that Shackle would presumably agree with. Its conclusion is not one of ‘intellectual chaos’… If anything, it’s one of intellectual progress where we are trying to get standard economic theory which states A causes or correlates B to think about the ‘element of surprise’. As long as there is human action, there will always be room for surprises.
In another comment on the same page as the one linked, Brady states:
However,it looks to me that Post Keynesians are trapped by their emphasis on uncertainty as total ignorance.How can their policies be shown to be superior to neoclassical ones ? Shackle’s answer is that they can’t and that the free market(and ONLY the free market) will spontaneously generate a solution over time.This is the Austrian answer.I’m not sure that this is the answer that Post Keynesians are expecting.
I question this reasoning made by Brady. Shackle, for one, is thought of a person in using ‘Austrian premises and Keynesian conclusions.’ Furthermore, I don’t know where he got the conclusion that the free market is the answer. This of course doesn’t mean that Shackle spoke negative about the market, he quite liked a market system, but that doesn’t mean he supported a free market at all.
Brady does offer some good critiques on post Keynesianism. The two that are the most interesting to me is Brady questioning post Keynesians as the true interpreters of Keynes. If anyone knows the post Keynesian school, they should know that post Keynesians speak so highly in that they think they are the true consistent interpreters of Keynes. Generally speaking, they view Keynes as a non mathematical economist that spoke of practical solution to solve some problems of capitalism. To the post Keynesian, there is nothing to make capitalism a stable system, but government can do things to limit the effects caused by the instability of capitalism. Brady, questions this by appealing to Keynes Treatise on Probability and states that Keynes was indeed a very mathematical economist. Brady’s point is that without reading the treatise, people will always lack a proper understanding of Keynes, and for the most part, post Keynesians have not read that treatise. This, I think, can be answered by appealing to the old Cambridge school (the neo Ricardians) instead of Keynes and just emphasize that they bring more of a subjectivist side to things (studies on expectations for example).
Also Brady questions the D-Z model advocated by the post Keynesians on very technical grounds. I myself do not understand the critique fully but generally, in Davidson’s approach Z is an upward sloping convex curve with a slope greater than one. Keynes, according to Brady, proved that the slope can only be one and is linear. This requires more research on the post Keynesian side. I am quite interested in this debate, since I generally like Davidson’s D-Z model.