Uncertainty and Economics: A Paradigmatic Perspective (Routledge Frontiers of Political Economy)

"This book is set against the assumption that humans' unique feature is their infinite creativity, their ability to reflect on their deeds and to control their actions. These skills give rise to genuine uncertainty in society and hence in the economy. Here, the author sets out that uncertainty must take centre stage in all analyses of human decision making and therefore in economics. Uncertainty and Economics carefully defines a taxonomy of uncertainty and argues that it is only uncertainty in its most radical form which matters to economics. It shows that uncertainty is a powerful concept that not only helps to resolve long-standing economic puzzles but also unveils serious contradictions within current, popular economic approaches. It argues that neoclassical, real business cycle, or new-Keynesian economics must be understood as only one way to circumvent the analytical challenges posed by uncertainty. Instead, embracing uncertainty offers a new analytical paradigm which, in this book, is applied to standard economic topics such as institutions, money, the Lucas critique, fiscal policy and asset pricing. Through applying a concise uncertainty paradigm, the book sheds new light on human decision making at large. Offering policy conclusions and recommendations for further theoretical and applied research, it will be of great interest to postgraduate students, academics and policy makers"-- Provided by publisher This Book Is Set Against The Assumption That Humans' Unique Feature Is Their Infinite Creativity, Their Ability To Reflect On Their Deeds And To Control Their Actions. These Skills Give Rise To Genuine Uncertainty In Society And Hence In The Economy. Here, The Author Sets Out That Uncertainty Must Take Centre Stage In All Analyses Of Human Decision Making And Therefore In Economics. Uncertainty And Economicscarefully Defines A Taxonomy Of Uncertainty And Argues That It Is Only Uncertainty In Its Most Radical Form Which Matters To Economics. It Shows That Uncertainty Is A Powerful Concept That Not Only Helps To Resolve Long-standing Economic Puzzles But Also Unveils Serious Contradictions Within Current, Popular Economic Approaches. It Argues That Neoclassical, Real Business Cycle, Or New-keynesian Economics Must Be Understood As Only One Way To Circumvent The Analytical Challenges Posed By Uncertainty. Instead, Embracing Uncertainty Offers A New Analytical Paradigm Which, In This Book, Is Applied To Standard Economic Topics Such As Institutions, Money, The Lucas Critique, Fiscal Policy And Asset Pricing. Through Applying A Concise Uncertainty Paradigm, The Book Sheds New Light On Human Decision Making At Large. Offering Policy Conclusions And Recommendations For Further Theoretical And Applied Research, It Will Be Of Great Interest To Postgraduate Students, Academics And Policy Makers. Aradigm Which, In This Book, Is Applied To Standard Economic Topics Such As Institutions, Money, The Lucas Critique, Fiscal Policy And Asset Pricing. Through Applying A Concise Uncertainty Paradigm, The Book Sheds New Light On Human Decision Making At Large. Offering Policy Conclusions And Recommendations For Further Theoretical And Applied Research, It Will Be Of Great Interest To Postgraduate Students, Academics And Policy Makers. Cover Half Title Series Information Title Page Copyright Page Dedication Table of contents Preface Acknowledgements Introduction 1 What's uncertainty, after all? 1.1 Institutions, events and actions 1.2 Determinism, risk, ambiguity and uncertainty 1.2.1 Determinism 1.2.2 Chance, risk and ambiguity 1.2.3 Uncertainty 2 Uncertainty in economics 2.1 The origins of uncertainty 2.1.1 The main assumption 2.1.2 Uncertainty: a human trait 2.2 Rationality, uncertainty and decision making 2.2.1 Subjectivity, objectivity and rationality 2.2.2 Decision making under uncertainty 2.2 The epistemology of economics 2.3.1 A brief look in the rear mirror 2.3.2 Positivist-falsificationist epistemology 2.4 Paradigmatic uncertainty 2.4.1 Puzzles 2.4.2 Rational expectations and uncertainty 2.4.3 Rationality and uncertainty ``measurement'' 2.4.4 Elements of an uncertainty paradigm 2.5 Economic epistemology and uncertainty: an application to the Lucas critique 3 Uncertainty in the economy 3.1 Uncertainty and institutions 3.2 Money 3.3 Fiscal policy and Keynes's battles: lost and won 4 The empirics of uncertainty 4.1 A model for asset pricing under uncertainty 4.1.1 The investor's objective function 4.1.2 The investment rule 4.1.3 The median investor 4.1.4 Properties of the subjective median model 4.2 Testing for uncertainty 4.2.1 Conventional asset pricing model and uncertainty 4.2.2 The empirical approach 4.2.3 The empirical evidence 5 Conclusion Bibliography Index It is argued that radical uncertainty is a powerful concept for economic analysis and applies it to standard economic topics such as institutions, money, the Lucas critique, fiscal policy and asset pricing. The book also offers policy conclusions and recommendations for further theoretical and applied research.