Sunday, May 1, 2011

Skidelsky on Keynesian Uncertainty

This is a nice summary by Robert Skidelsky of the concept of uncertainty in Keynes’ thought.



I would add that the interested reader can go straight to Keynes’ important 1937 article where he emphasised the concept of uncertainty and its implications for economics:
Keynes, “The General Theory of Employment,” Quarterly Journal of Economics 51 (1937): 209–223.
The crucial passage is here:
“By ‘uncertain’ knowledge, let me explain, I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty; nor is the prospect of a Victory bond being drawn. Or, again, the expectation of life is only slightly uncertain. Even the weather is only moderately uncertain. The sense in which I am using the term is that in which the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence, or the obsolescence of a new invention, or the position of private wealthowners in the social system in 1970. About these matters there is no scientific basis on which to form any calculable probability whatever” (Keynes 1937: 213–214).

6 comments:

  1. This is not relevant to this blog post, but I just wanted to say.

    I have become pretty disillusioned with mainstream pop free marketers who don't understand their own economic theories. So I have recently found myself inching much closer to YOUR side of things.

    Gosh, it has been New Keynesian and Post Keynesian blogs where I see any sanity left. Surprisingly, some of the people in such blogs understand free market economics better and are more consistent with using free market ideas.

    I was just at Mises.Org forums, and people were discussing the possibility of both hyperinflation and a second dip into **depression** in America in the immediate future. I found it absurdly ridiculous.

    Some of the other discussions of the free market blogosphere involve blaming rising oil prices and food prices on Bernanke. GOD!

    If things go on like this, I'll probably end up a MMTer or Post Keynesian too quickly. Today's free marketers are a disgrace compared to those of the past.

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  2. "So I have recently found myself inching much closer to YOUR side of things."

    Well, that is rather encouraging and pleasing, to say the least.

    I would say: if you want an economy with a large measure of private enterprise and private production that actually works well, and that people in general will support, because it delivers high employment and real wage rises in line with productivity growth, you need Keynesian macroeconomic management.

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  3. By the way, on the issue of rising stock market prices and some spiking commodity prices, no doubt QE is ONE factor in it, though hardly the only one.

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  4. This video begs the question. Why do elite Keynesian bureaucrats have superior knowledge to market based entrepreneurs and doesn't Keynesian funny money dilution distort the only source of knowledge to deal with the uncertainty, free market prices?

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  5. I was just at Mises.Org forums, and people were discussing the possibility of both hyperinflation and a second dip into **depression** in America in the immediate future. I found it absurdly ridiculous.

    That's called stagflation. But not only historically or possibly, stagflation is what we have right now, ie price inflation + high unemployment + mediocre growth, basically the holy trinity of keynesian origin.

    Some of the other discussions of the free market blogosphere involve blaming rising oil prices and food prices on Bernanke. GOD!

    That's what inflation means, rising prices, maybe you should go back to econ 101. Central banks are the ones that generate all aggregate inflation there is, so also rising prices, and that has to start somewhere, doesn't it.

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  6. Stagflation = negative GDP growth/high unemployment + high or double digit inflation.

    The current US situation is positive GDP growth + low inflation + high involuntary employment.

    2009 and 2010 in the US were years of massive disinflation, by the way.

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