Brady, Michael Emmett. 2013. “The Economic Consequences of G. L. S. Shackle’s Ignorance of Keynes’s Theory of Probability, Uncertainty, and Decision Making,” SSRN paper, August 13In essence, Brady argues that Shackle did not accept degrees of uncertainty, had a questionable view of inductive reasoning, and rejected the validity of even epistemic probabilities. Shackle’s view is supposedly that “there was only either a state of complete uncertainty or certainty” (Brady 2013: 2).
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2309259
Perhaps these criticisms of Shackle are valid, but Brady’s claims about Post Keynesianism are problematic. As I have argued here, there are Post Keynesians, even prominent ones, who recognise degrees of uncertainty.
Yet another questionable assertion is that Ramsey thought that “all probabilities are real numbers between 0 and 1” (Brady 2013: 7). But Frank Ramsey seems to have accepted a “two-concept view” of probability: (1) as a concept in logic (and presumably a measure of the subjective belief of a person) and (2) as a concept in the natural sciences, namely, the frequency theory of probability (Gillies 2000: 180–181).
BIBLIOGRAPHY
Brady, Michael Emmett. 2013. “The Economic Consequences of G. L. S. Shackle’s Ignorance of Keynes’s Theory of Probability, Uncertainty, and Decision Making,” SSRN paper, August 13
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2309259
Gillies, D. A. 2000. Philosophical Theories of Probability. Routledge, London.
No they're not valid. Shackle's work on decision-making allows for ordering decisions based on their 'possibility'. Some are seen as 'less possible' and some as 'more possible'. So, it is not a binary system of thought.
ReplyDeleteEmmett is an extremely poor scholar and strikes me as a bit of a crank.
Yes, I got the impression that the characterisation of Shackle's views was a bit much too, but was trying to be charitable.
Delete"Emmett is an extremely poor scholar and strikes me as a bit of a crank."
DeleteLOL! Brady's attacks on a lot of PKers (ex. Paul Davidson) are completely valid. Davidson talks about concepts he clearly doesn't understand. Just take a look at this video where he talks about ergodicity and financial markets not being ergodic (when they are).
Just watch this video:
https://www.youtube.com/watch?v=YAbnuwsid4Q
Then read anything on the basis of ergodicity (like the link below):
http://en.wikipedia.org/wiki/Ergodicity
Ergodicity is a long term behavior and Keynes actually recognized that financial markets are ergodic. Note that it's possible to design a Markov Chain that's positive recurrent and aperiodic to represent an economy where the states can be defined as such:
1. High inflation, high growth
2. Low inflation, high growth
3. High inflation, low growth
4. Low inflation, low growth
Unless you can prove that an economy won't ever reach any of those states ever again throughout the rest of history, financial markets and economic systems are obviously ergodic. You can define different states if you want and you'll still get the same result. Keynes actually recognized this, but we didn't have the same developments in probability that we do know.
From his statements, it's clear that Davidson sucks at probability, but he's making statements about things he clearly doesn't understand.
On the issue that uncertainty (as opposed to risk) comes in degrees, Brady is right.
DeleteBrady is wrong on a lot of other issues: he claims that John Maynard Keynes opposed deficit spending.
And yet Keynes openly calls for deficit spending in a number of places.
E.g., in an open letter to Roosevelt:
"(17) In the field of domestic policy, I put in the forefront, for the reasons given above, a large volume of Loan-expenditures under Government auspices. It is beyond my province to choose particular objects of expenditure. But preference should be given to those which can be made to mature quickly on a large scale, as for example the rehabilitation of the physical condition of the railroads. The object is to start the ball rolling. The United States is ready to roll towards prosperity, if a good hard shove can be given in the next six months."
http://socialdemocracy21stcentury.blogspot.com/2011/09/keynes-on-new-deal-in-1933.html
Keynes also urged more US deficit spending in an open letter in early 1938.
Keynes was a conservative. Anyone who says Keynes was this left leaning wacko clearly hasn't read him. Throughout his entire life, he was vehemently against freely floating exchange rates.
DeleteBTW, there's a difference between wanting deficit spending in a country like the US during a time like 1933 and 1938 vs any other time during the country's history. Keynes' argument was that the social costs of high and sustained unemployment with unemployment that high could've been counterbalanced by some productive investment. That's not a extremely leftist argument and I think Brady is correct to say Adam Smith's position would've been the same.
I don't know how you can legitimately say Keynes was from the left without taking a look at Keynes' proposal at Bretton Woods.
Suvy Boyina,
DeleteNot sure where this comment is even coming from.
I am not of the opinion that Keynes was an "extreme leftist" or held "extremely leftist" positions. He opposed Marxism and communism, and his opinion of Marx's economics was low, even scornful.
But Keynes called himself a "liberal" throughout his life, not a conservative, and his "liberalism" was firmly in the tradition of the progressive type that developed in the UK from the late 19th century onwards.
Indeed, around 1911 Keynes seems to have had some contact with the Fabian socialists at Cambridge; his father commented in his diary entry for 6 September 1911:
“Maynard avows himself a Socialist and is in favour of confiscation of wealth” (quoted in Moggridge, D. E. 1992. Maynard Keynes: An Economist’s Biography, Routledge, London. p. 190).
Of course, Keynes' "socialism" here isn't Marxism but the progressive liberalism of these years that was in favour of progressive taxation and income tax.
A close look at Keynes' political and economic ideas in later life shows him to be firmly in the camp of what we would call a progressive left-leaning liberal.
He tells us this himself in his essay "Am I a Liberal?", where rejects conservatism and the Labour party politics :
"Now take my own case—where am I landed on this negative test? How could I bring myself to be a Conservative? They offer me neither food nor drink—neither intellectual nor spiritual consolation. I should not be amused or excited or edified. That which is common to the atmosphere, the mentality, the view of life of—well, I will not mention names—promotes neither my self-interest nor the public good. It leads nowhere; it satisfies no ideal; it conforms to no intellectual standard; it is not even safe, or calculated to preserve from spoilers that degree of civilisation which we have already attained.
Ought I, then, to join the Labour Party? Superficially that is more attractive. But looked at closer, there are great difficulties. To begin with, it is a class party, and the class is not my class. If I am going to pursue sectional interests at all, I shall pursue my own. When it comes to the class struggle as such, my local and personal patriotisms, like those of every one else, except certain unpleasant zealous ones, are attached to my own surroundings. I can be influenced by what seems to me to be Justice and good sense; but the Class war will find me on the side of the educated bourgeoisie.
But, above all, I do not believe that the intellectual elements in the Labour Party will ever exercise adequate control; too much will always be decided by those who do not know at all what they are talking about; and if—which is not unlikely—the control of the party is seized by an autocratic inner ring, this control will be exercised in the interests of the extreme Left Wing—the section of the Labour Party which I shall designate the Party of Catastrophe.
On the negative test, I incline to believe that the Liberal Party is still the best instrument of future progress—if only it had strong leadership and the right programme."
http://www.gutenberg.ca/ebooks/keynes-essaysinpersuasion/keynes-essaysinpersuasion-00-h.html
How often did Keynes change his mind? At the end of his life, he's quoted as saying that the biggest problems the UK had could've been fixed by Adam Smith's invisible hand during one of the most largest expansions of government services after the Second World War.
DeleteKeynes was like most people--he became more conservative as he aged. It's that simple.
So now you're saying he wasn't a conservative for most of his life, but was only a conservative at the end?
DeleteThe trouble with this is that it is based on dubious evidence. That remark (if true) might have been a throw-away line by Keynes to disarm a hostile critic at lunch, which, anyway, is only documented second hand by the person who went to lunch with him.
All in all, a pretty feeble way to try and prove that Keynes was a conservative, especially when all the thrust of his work from 1930 to 1945 is not conservative.
Anyway, on Keynes' "invisible hand" remark:
Deletehttp://socialdemocracy21stcentury.blogspot.com/2014/09/what-was-keynes-political-philosophy.html
"Ergodicity is a long term behavior and Keynes actually recognized that financial markets are ergodic. Note that it's possible to design a Markov Chain that's positive recurrent and aperiodic to represent an economy where the states can be defined as such:
Delete1. High inflation, high growth
2. Low inflation, high growth
3. High inflation, low growth
4. Low inflation, low growth
Unless you can prove that an economy won't ever reach any of those states ever again throughout the rest of history, financial markets and economic systems are obviously ergodic."
HAHAHAHAHAHA!
This is genius! Best comment that I have seen on here in a long time. Gold star to Suvy Boyina.
http://en.wikipedia.org/wiki/Not_even_wrong
Keynes is a conservative in the Hamiltonian sense. If I'm correct, Keynes did support public investment in infrastructure and public works, supported policies to target strong internal demand in an economy, and wanted policies to sustain high wages, didn't he? All of those are parts of a conservative philosophy.
DeleteYo Pilkington, go and look up the definition of ergodicity as defined in any mathematics textbook. Go and get a book on probability theory or Markov Chains or dynamic systems. Ergodicity doesn't mean perfect predictability or no randomness. It means long run convergence, but just because there's long run convergence doesn't mean that there isn't short run chaotic behavior. In dynamic systems, you usually see both.
Delete"Keynes is a conservative in the Hamiltonian sense."
DeleteKeynes self-identified as a liberal, but never as a conservative, not even a Hamiltonian conservative (which anyway is probably irrelevant to the British political scene).
Trying to label Keynes a conservative, when he clearly rejected the label is ridiculously unreasonable.
LK, have you read anything by Georg Henrik von Wright ,that succeeded Ludwig Wittgenstein as professor at the University of Cambridge? If not, i think you will like his work in
ReplyDeleteA Treatise on Induction and Probability, 1951
An Essay in Deontic Logic, 1968
and An Essay in Modal Logic 1951.It could also be of interest for you in a way since was a friend not only with Wittgenstein but also Keynes as well as Piero Sraffa among others.
No, I haven't -- but thanks for the reading suggestions.
DeleteLK, i did check on the internet, í found at least those ones about and by G.H von Wright in pdf.
DeleteRosaria Egidi -Von Wright’s philosophical humanism
http://lnx.journalofpragmatism.eu/wp-content/uploads/2009/11/10-egidi1.pdf
Deontic Logic -G. H. von Wright -Jan., 1951
http://wnswz.strony.ug.edu.pl/von%20wright,%20deontic%20logic.pdf
G,H Von Wright -The Problem with Induktion (1941)
https://archive.org/stream/logicalproblemof010585mbp#page/n33/mode/2up
Just a moment, LK.
ReplyDeleteYour reply (12:14 AM) to Suvy Boyina's comment (11:22 PM) was off topic. Whether Brady is wrong or not on a lot of other issues is not important here.
What's important here is THIS issue. I don't care if he is wrong in everything else under the sun, I want to see you answer to Suvy:
"Unless you can prove that an economy won't ever reach any of those states ever again throughout the rest of history, financial markets and economic systems are obviously ergodic."
"In mathematics, the term ergodic is used to describe a dynamical system which, broadly speaking, has the same behavior averaged over time as averaged over the space of all the system's states (phase space). "
Deletehttp://en.wikipedia.org/wiki/Ergodicity
Surely that is equivalent to saying that the system's states over time converge to long run relative frequencies.
I am having a hard time seeing how financial markets are ergodic.
Just because they converge in the long run doesn't tell you anything about the short term behavior of the process.
Delete"Surely that is equivalent to saying that the system's states over time converge to long run relative frequencies."
DeleteThat's exactly what ergodicity means, but the convergence could occur on time frames that are much longer than our lifetimes. The long run behavior of a system (say over the course of 200 years) tells you nothing about what's gonna happen tomorrow.
Take the weather as an example. Over the long run, it's pretty clear that the system is ergodic, but if you go beyond prediction intervals of a week, it's completely useless.
Most natural systems are ergodic, including economies.
"The long run behavior of a system (say over the course of 200 years) tells you nothing about what's gonna happen tomorrow."
DeleteA statement that suggests to me that you have no idea what you're talking about.
In fact, in an ergodic system, the long run behaviour is exactly what gives it away as an ergodic system when the occurrences of the system's states over time converge to long run relative frequencies.
Also, regarding climate, whether the system is ergodic is disputed even by climate scientists. E.g., Edward Norton Lorenz, a pretty famous the American mathematician and meteorologist, thought that earth's climate system had non-ergodic properties (Kagan, B. A. 1995. Ocean-Atmosphere Interaction and Climate Modelling [trans. Mikhail Hazin], Cambridge University Press, Cambridge. p. 15).
If it can go from one state to any other state over any number of time steps, it's ergodic by definition.
DeleteI know exactly what I'm talking about. What you're saying about ergodicity in terms of the long run convergence can actually be proven as a theorem]. It's right here. If you don't believe me, look in a graduate level probability textbook. I know I'm right.
https://math.dartmouth.edu/archive/m20x06/public_html/Lecture15.pdf
I'm aware of Lorenz's work. I've got a lot of experience with chaos theory and I've done research in the field.
Here are some textbooks that I have that discuss this topic. If you have access to a college library, you should be able to check out at least one of these textbooks.
Introduction to Probability Models by Sheldon Ross (I've got the 10th Edition)
Introduction to Stochastic Modeling by Mark Pinsky and Samuel Karlin (I've got the 4th edition)
Probability, Markov Chains, Queues, and Simulation: The Mathematical Basis of Performance Modeling by William Stewart (note that the author of this textbook was my former professor)
Markov Decision Processes by Puterman
Go and take a look at any textbook used in a stochastic modeling class and then get back to me. I know I'm right on this.
"If it can go from one state to any other state over any number of time steps, it's ergodic by definition."
DeleteThat is not a definition of ergodicity I have ever seen, and indeed you have already committed yourself to the standard definition:
"In mathematics, the term ergodic is used to describe a dynamical system which, broadly speaking, has the same behavior averaged over time as averaged over the space of all the system's states (phase space)."
http://en.wikipedia.org/wiki/Ergodicity
This clearly requires that your definition above is not a sufficient one for ergodicity .
I'm willing to bet that, once again, you have no idea what you are talking about.
I think Suvy Boyina is suggesting that markets are Markov Chains, therefore the narrower definition applies. State based modelling is horrendous when there are more than a few simple states. The use of a four state model to try to fit economics into Markov chains is just silly. That's like saying that humans have only two states, alive and dead. All that happens by doing this is to deference the problem to further internal states.
DeleteThe use of Markov chains in this context is only a bodge to represent internal states that cannot be expressed. In reality markets are not Markov chains. Probability is merely used to describe hidden causality.