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.