In Defense of Shackle

In an article by John Allen Kregel and Eric Nasica entitled “Uncertainty and Rationality: Keynes and Modern Economics”, which is in the book Fundamental Uncertainty: Rationality and Plausible Reasoning edited by Silva Marzetti Dall’Aste Brandolini and Roberto Scazzieri, the authors state the following about Shackle’s ”nihilism”:

Despite these attempts to clarify the importance of uncertainty in the sense given the term by Keynes and Knight for empirical analysis, mainstream evaluation of the question remains that represented by Walliser (1985, p. 17), who writes that Keynes’s ideas on uncertainty have ‘remained at the preformal stage, they do not seem to have had any general “cultural” influence on economic thinking except as complications or useless subtleties’. Indeed, for most economists better-known Keynesian concepts such as ‘animal spirits’ are considered to be purely subjective and thus irrational and unscientific. As a result, in the contemporary literature Keynes’s analysis is either criticized or credited as an approach to macroeconomics that is incompatible with the traditional concept of individual behaviour based on the assumption of economic rationality.5 This situation is in part linked to the identification of Keynesian uncertainty with radical subjectivism, and the associated scientific and theoretical nihilism. This is clearly the interpretation of Keynes adopted by Lucas, who writes that ‘in cases of uncertainty, economic reasoning will be of no value’ (Lucas, 1981, p. 224). It must be admitted that some Post Keynesian authors have given support to such an interpretation. For example, Shackle has claimed to be a ‘nihilist’, and applied the same term to Keynes (see Shackle, 1984, p. 391).

Then the authors conclude:

 …this approach is incompatible with Keynesian uncertainty and non-ergodic processes, its force has been ignored because it appears to be based on radical subjectivism and theoretical nihilism.

This is not true at all. The passage that the authors refer to does mention the term ‘nihilistic’ but you have to look at the context of which the term is placed. Shackle is not saying that he is necessarily nihilistic or that Keynes is necessarily nihilistic. What he is pointing out is that the way he interprets Keynesian uncertainty, is one that some economists would look at as nihilistic because those economists are concerned with predictive simple models. It’s almost like me saying, “My studies on finance has led me to a state of thought that some mainstream economists would find stupid since I worry about private debt. Let them name me that, but at the end of the day, they are the ones that are closed minded for their theories ignore the importance of debt.” I did not call myself stupid, and I merely stating that some mainstream economists would find my thought as stupid. The same applies to the passage by Shackle, he isn’t saying he is nihilistic, he is merely stating that some critics will find his thoughts of uncertainty as nihilistic. Oh, by the way, here is the passage by Shackle:

Malcolm Rutherford’s comparison of the rational expectation hypothesis with Keynes’s dealings with uncertainty goes beyond this explicit purpose to a more general survey of the essence of the making of crucial decisions. His study leads him (as such study has led me) to a state of thought which the builders of precise predictive models will call nihilistic. Keynes was also nihilistic. In his Quarterly Journal epitome of his theory of employment he is contemptuous of the notion that business decisions, especially investment decisions, can be the work of adequately-informed reason. They are necessarily shaped (so far as they are not radical originations) by suggestions offered by visible current processes and circumstances, and by businessmen’s canvassing of each other’s opinions as a mean of spreading a wider net for knowledge and ideas. In the General Theory itself Keynes declares that all such decisions must spring ultimately from “animal spirits.” Uncertainty is the central nerve of Keynes’s theory of employment and output-as-a-whole, yet the presence of the idea of uncertainty in the book is particular . It may be said to haunt the whole work, for it appears in many places, yet no articulation is offered of any thought-process by which businessmen may seek to cope with it or exploit it.

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12 responses to “In Defense of Shackle

  1. Dr. Michael Emmett Brady has reviewed that book you mentioned over here. While the review critiques the philosopher Henry Kyburg for failing to recognise the novelty of Keynes’s interval estimate approach to probability, Dr. Michael Emmett Brady’s critique of Henry Kyburg can be said to apply to G.L.S. Shackle.

    http://www.amazon.com/review/R2NEIT3YHY62MV/

    Isaac, you may also wish to check out the following working paper by Dr. Michael Emmett Brady that was published in the International Journal of Applied Economics and Econometrics. According to Dr. Michael Emmett Brady, G.L.S. Shackle commits the antinomian fallacy.

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1920569

  2. Brady defines the antinomian fallacy as:
    “the antinomian fallacy argues that all events in history are unique.All inductive generalizations are false.It is impossible to learn from experience.Thus,no general theories are possible in the social sciences or liberal arts since institutions are constantly evolving over time during each specific historical period.”

    Short answer: ontological uncertainty =/= nihilism

    One can learn from experience, historical data is unique but doesnt mean we cant learn from it, inductive generalizations are not ALWAYS ‘false’. What Brady is assuming to make all of what he says is true about shackle is that shackle was a nihilist.

  3. Well, while I can’t speak for Dr. Michael Emmett Brady, he covers Shackle and Carabelli’s misuse of the term “uncertainty” in the paper (“Keynes, Mathematics, and Probability: A Reappraisal”) that I just linked to you above. Do you believe that Dr. Michael Emmett Brady’s critique of Shackle’s definition of uncertainty holds no water whatsoever, Isaac?

    • I could only imagine what his criticism would be given that I haven’t read the paper. Though if it is the same criticism as what is seen in the Amazon reviews, then I know them. Let me say that Brady has misinterpreted Shackle for his use of uncertainty by no means imply nihilism. This post should make it clear that it was not Shackle’s intent to be viewed as nihilistic, though I guess he understood why people would label him as such.

      • “Keynes, Mathematics, and Probability: A Reappraisal” is a far more elaborate and better written critique of Post Keynesian approaches to uncertainty. However, here’s an even better paper – “The ‘Early’ Logical Empiricism of J.M. Keynes Versus the Rhetoric of Subjectivism and Psychologicism”. It critiques both Austrians and Post-Keynesians alike.

        http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1920578

        I strongly suggest reading those two papers, as they have important criticisms to make of the Austrian School of Economics and the Post Keynesian School of Economics.

  4. The reason Shackle is properly termed a nihilist is because he made it crystal clear that he rejected all theories of probability ,including Keynes’s logical theory of probability.He also is required to reject all inductive logics and analogical analysis as a reseult.He made the truly absurd claim that Keynes had rejected his own theory of probability in the GT.
    Shackle claimed that his approach ,a degree of disbelief-focus gain-focus loss approach, dealt with non-additivity and non linearity while ALL other theories of probability did not.The problem here is that Shackle was only able to read the first 10-15 pages of the TP before he gave up.What would Shackle have discovered if he had taken the time to actually have read the A Treatise on Probability ? He would have discovered that Keynes had already put forth a non additive-nonlinear approach to probability and decision theory that was vastly superior to anything Shackle had written on the topic when Shackle was 5 years old in 1908.Shackle’s inferior analysis was written because he was conmpletely ignorant of what Keynes’s theory of probability entailed.

    • Thanks Brady for this comment, I do have to read your works (which Blue Aurora has been ‘dieing’ to get me to read) before giving my own response. I’ve read most of your amazon reviews on the subject but I feel like I might misrepresent your position if I just comment solely on what you have said in Amazon. I will probably email you my response, is the email you put on here a valid email, if not you can message me your email, my email is isaac.v.marmolejo@gmail.com . Just to warn you though, I have a lot on my reading list. So much to read, so little time.

      • No Problem. The email address is correct.
        It is Shackle’s views on the uniqueness of all events that leads him to reject all theories of probability.He then ends up taking a nihilist position because ,unless there are some similarities and dissimilarities between past and present events,there can be no comparison -contrasts or newly created knowledge using pattern recognition and analogy .This leads Shackle to his concept of uncertainty,that there is either certainty (knowledge) or uncertainty(unknowledge or no knowledge).Thie is the same as Keynes’s complete uncertainty,or ignorance, where w,the weight of evidence ,is equal to 0.Keynes regards this as an extreme ,but important ,case if you are dealing with the construction of long lived physical capital goods or facing technological breakthroughs.Keynes is much more concerned with the case of partial ignorance /partial knowledge that allows the use of a sophisticated concept of induction based on human memory and resemblances between past and present events.Keynes’s case based analysis is in Part III of theTP.Bertrand Russell’s final statement on the topic,in his My Philosophical Development,is that Keynes has no peer or equal when it comes to inductive logic

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