[lbo-talk] Risk and Keynesian Uncertainty

[Cseniornyc at aol.com]

Doug Henwood wrote: "Sometimes there are real 
breaks, but those are  rare. It's like Keynes's distinction between 
risk, which is statistically  quantifable within predictable 
parameters, and uncertainty, which isn't.  Risk is a lot more 
prevalent than radical uncertainty."
Comment: Actually,  for Keynes uncertainty was the prevalent state of  the 
world at least in respect to economic affairs.For him, the concept of risk  is 
associated with the concept of probability, a precise numerical value, which  
is more proper of card and table games which can be subjected to repeated 
trials  and the generation of long historical records.
For Keynes, however, most economic events were non ergodic, i.e. lacking  
immutable market fundamentals with objective probability distributions.  
Therefore, for him, in this uncertain world, the fundamentals do not provide a  
reliable guide to the future, which is subject to sudden and violent changes  and,  
therefore, future market valuations were subject to  dissapoinment.This was 
his standard response to classical general equilibrium  models which assume 
ergodicity.
Cristobal Senior

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