Jochen Runde

Keynesian Uncertainty and the Weight of Arguments

In Chapter 12 of the General Theory, on “The State of Long-Term Expectation,†Keynes writes: “It would be foolish, in forming our expectations, to attach great weight to matters which are very uncertain†(CW VII, p. 148). In a footnote to this sentence, Keynes points out that by “very uncertain†he does not mean the same as “very improbable†and refers to the chapter on “The Weight of Arguments†in his earlier Treatise on Probability (CW VIII, pp. 77–85). The purpose of this article, in the first place, is to provide an account of, and to sort out the relations between, Keyness views on probability, uncertainty, and the weight of arguments.

Technological objects, social positions, and the transformational model of social activity

The transformational model of social activity (TMSA), in many ways the centerpiece of critical realism, has been widely used in areas of information systems research. However, little has been done so far to develop a systematic theory of the nature, position, and identity of technological objects within the context of the TMSA. Our aim in this paper is to fill this gap, paying particular attention to the important category of nonmaterial technological objects that lie at the heart of modern information systems.

Keynesian uncertainty and the instability of beliefs

In an influential critique, Coddington (1982) argues that Keynes uses the theme of uncertainty in an opportunistic way in the General theory emphasizing it when it suits his purposes and ignoring it when it does not. This reading is examined in the light of Keyness earlier Treatise on probability. The first part of the paper argues that Keyness epistemology differs in important respects from the one Coddington is attacking, and in particular, that Keyness account contains conceptions of uncertainty not considered by Coddington. The two premises of Coddingtons argument are then assessed. These are: 1) that Keynes provides no account of the relative impact of uncertainty in different decision-making contexts; and 2) that uncertainty is not a sufficient condition for unstable beliefs about future outcomes of current (investment) decisions. It is argued that Coddington is mistaken in asserting 1) and, although 2) is correct in principle, that there is nevertheless a strong presumption that uncertainty doe...

Keynes after Ramsey: In defence of a treatise on probability

Abstract Ramseys critique of Keyness ‘logical’ approach to probability is widely regarded as decisive, and his own ‘subjective’ approach and SEU framework are now familiar tools in economics. This paper challenges the standard view of Ramseys critique and assesses the SEU model from a Keynesian viewpoint on probability. It consists of a summary of the two theories and an evaluation of Ramseys criticisms and alternative. The two main conclusions are (i) that although Keynes yields to Ramsey on the question of the existence of logical probability relations, the formal structure of his theory is compatible with non-objectivist interpretations of probability; and (ii) that Ramsey makes far heavier demands on the capacities of the ‘rational agent’ than does Keynes.

On Popper, Probabilities, And Propensities

This paper traces the development of Poppers thinking on propensities from his writings on probability during the 1950s through to his 1990 bookA World of Propensities. It is argued that there are significant commonalities between the views expressed in this (his last) book and the metaphysics and methodological implications of Critical Realism. The paper concludes with some consequences for Popperian falsificationism, situational determinism and Poppers later view that propensities may be interpreted as causes.

Bringing Social Structure Back into Economics: On Critical Realism and Hayek's Scientism Essay

This paper offers a critique of the critical realist (CR) interpretation of Friedrich Hayeks famous essay Scientism and the Study of Society presented in Tony Lawsons recent Economics and Reality. It is argued, contrary to Lawsons reading, that Hayeks social structures (1) do have an existence over and above the conceptions of the individual actors and (2) serve as a precondition for human action on the lines proposed by CR. Some links are made between Hayeks essay and the theory of social reality recently proposed by John Searle, and some comparisons drawn with CR.

Evaluating Causal Explanations of Specific Events

Organizational life and research regularly involve having to explain specific events. This paper considers how such explanations might be evaluated. We outline a theory of causal explanations as answers to why-questions and introduce criteria to assess such explanations. The criteria are illustrated via an analysis of different explanations proposed for the remarkable success of Honda’s entry into the US motorcycle market.

DISSECTING THE BLACK SWAN

ABSTRACT What constitutes a Black Swan? And under what conditions may a Black Swan be expected to arise? As Nassim Taleb describes it, a Black Swan is an event that displays three key properties, the two most important of which are that: (1) it is not even imagined as a possibility prior to its occurrence; and (2) it is in some way significant in its impact. It follows that whether or not an event counts as a Black Swan depends on the subjective imaginings of contemporaneous observers and their (usually implicit) criteria regarding what counts as a “significant impact.” Since there is nothing in determinism that precludes (1) and (2), Black Swans may occur even in a perfectly deterministic world. Nevertheless, if the world is indeed characterised by randomness, free will, emergence, and the like, then it is arguably more likely to throw forth events that display the above‐mentioned properties. The same goes for various specific features of an increasingly interconnected global economy, which allowed Taleb (paradoxically) to forecast what was, for most of us at least, the great Black Swan of 2008.

Subjectivism, Psychology, and the Modern Austrians

Most Austrians are likely to say that economics and psychology are separate disciplines and should remain so. This position stems from a reliance on their version of the rationality postulate — that means are purposefully applied to arrive at certain ends — to account for action. But an emphasis on purposefulness and reason may alone no longer be sufficient to keep Austrian economics distinct from psychology. The Austrians have long stressed the influence of time and uncertainty on human action, something which has culminated in their acceptance of many of the views of Shackle. Shackle (1972) draws attention to the fundamental antagonism between time and reason. Should this result in the rationality postulate being abandoned, the door to alternative accounts of choice and action is opened. Austrians interested in pursuing these questions will find it increasingly difficult to keep psychology at bay.

De Finetti on the insurance of risks and uncertainties

In the insurance literature, it is often argued that private markets can provide insurance against ‘risks’ but not against ‘uncertainties’ in the sense of Knight ([1921]) or Keynes ([1921]). This claim is at odds with the standard economic model of risk exchange which, in assuming that decision-makers are always guided by point-valued subjective probabilities, predicts that all uncertainties can, in theory, be insured. Supporters of the standard model argue that the insuring of highly idiosyncratic risks by Lloyds of London proves that this is so even in practice. The purpose of this article is to show that Bruno de Finetti, famous as one of the three founding fathers of the subjective approach to probability assumed by the standard model, actually made a theoretical case for uncertainty within the subjectivist approach. We draw on empirical evidence from the practice of underwriters to show how this case may help explain the reluctance of insurers to cover highly uncertain contingencies. 1 Introduction 2 Knight and Keynes on the Philosophy of Unknown Probabilities and Lloyds of London   2.1 Knight   2.2 Keynes 3 Insuring Unique Events: The Subjectivist Viewpoint as Represented by de Finetti 4 The ‘Philosophy’ of Practitioners 5 De Finetti on Uncertainty in Knight and Keynes and on Insurability   5.1 De Finetti on Knight   5.2 De Finetti on Keynes 6 Empirical Evidence on Insurance Under Ambiguity 7 Conclusion 1 Introduction 2 Knight and Keynes on the Philosophy of Unknown Probabilities and Lloyds of London   2.1 Knight   2.2 Keynes   2.1 Knight   2.2 Keynes 3 Insuring Unique Events: The Subjectivist Viewpoint as Represented by de Finetti 4 The ‘Philosophy’ of Practitioners 5 De Finetti on Uncertainty in Knight and Keynes and on Insurability   5.1 De Finetti on Knight   5.2 De Finetti on Keynes   5.1 De Finetti on Knight   5.2 De Finetti on Keynes 6 Empirical Evidence on Insurance Under Ambiguity 7 Conclusion