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Uncertainty, bounded rationality and post-Keynesian Macroeconomics


  • Finn Olesen

    () (Associate Professor, Department of Environmental and Business Economics, University of Southern Denmark)


As a core element in mainstream neoclassical theory we assume that economic agents behave rationally. They have full information about everything of economic relevance at present, as well as concerning the future. They either maximize their profit or their utility. Is the model of the rational economic man realistic and a useful concept? According to post-Keynesians and the school of bounded rationality (e.g. the works of Herbert Simon and others) the answer to this question is ›No‹. In this paper we discuss some aspects of bounded rationality and the position taken by Keynes and by the post-Keynesians who argued that actual behaviour is restricted and less than perfect due to the existence of fundamental uncertainty as pointed out by Keynes in his General Theory. Therefore, the macroeconomic system should be seen as an open, changeable and path-dependent system.

Suggested Citation

  • Finn Olesen, 2010. "Uncertainty, bounded rationality and post-Keynesian Macroeconomics," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 7(1), pages 109-124.
  • Handle: RePEc:elg:ejeepi:v:7:y:2010:i:1:p:109-124

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    References listed on IDEAS

    1. Stephen P. Dunn, 2001. "Bounded Rationality Is Not Fundamental Uncertainty: A Post Keynesian Perspective," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 23(4), pages 567-587, July.
    2. Morgan, Mary S., 2006. "Economic Man as Model Man: Ideal Types, Idealization and Caricatures," Journal of the History of Economic Thought, Cambridge University Press, vol. 28(01), pages 1-27, March.
    3. Simon, Herbert A, 1978. "Rationality as Process and as Product of Thought," American Economic Review, American Economic Association, vol. 68(2), pages 1-16, May.
    4. Sheila C. Dow, 2004. "Uncertainty and monetary policy," Oxford Economic Papers, Oxford University Press, vol. 56(3), pages 539-561, July.
    5. Tony Lawson, 1994. "The Nature of Post Keynesianism and Its Links to Other Traditions: A Realist Perspective," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 16(4), pages 503-538, July.
    6. Lawson, Tony, 1985. "Uncertainty and Economic Analysis," Economic Journal, Royal Economic Society, vol. 95(380), pages 909-927, December.
    7. Tony Lawson, 1999. "Connections and Distinctions: Post Keynesianism and Critical Realism," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 22(1), pages 3-14, September.
    8. David Dequech, 2007. "Neoclassical, mainstream, orthodox, and heterodox economics," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 30(2), pages 279-302.
    9. Dany Lang & Mark Setterfield, 2006. "History versus equilibrium? on the possibility and realist basis of a general critique of traditional equilibrium analysis," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(2), pages 191-209.
    10. Victoria Chick & Sheila Dow, 2005. "The meaning of open systems," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(3), pages 363-381.
    11. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    12. McFadden, Daniel, 1999. "Rationality for Economists?," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 73-105, December.
    13. Sheila C. Dow, 1996. "The Methodology of Macroeconomic Thought," Books, Edward Elgar Publishing, number 933.
    14. Victoria Chick, 2003. "Theory, method and mode of thought in Keynes's General Theory," Journal of Economic Methodology, Taylor & Francis Journals, vol. 10(3), pages 307-327.
    15. Simon, Herbert A, 1979. "Rational Decision Making in Business Organizations," American Economic Review, American Economic Association, vol. 69(4), pages 493-513, September.
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    Cited by:

    1. Jorge Garcia-Arias & Eduardo Fernandez-Huerga & Ana Salvador, 2013. "European Periphery Crises, International Financial Markets, and Democracy," American Journal of Economics and Sociology, Wiley Blackwell, vol. 72(4), pages 826-850, October.

    More about this item


    uncertainty; bounded rationality; post-Keynesian economics;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian


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