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Uncertainty, bounded rationality and post-Keynesian Macroeconomics

Listed author(s):
  • 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.

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File URL: http://www.elgaronline.com/view/journals/ejeep/7-1/ejeep.2010.01.10.xml
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Article provided by Edward Elgar Publishing in its journal Intervention.

Volume (Year): 7 (2010)
Issue (Month): 1 ()
Pages: 109-124

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Handle: RePEc:elg:ejeepi:v:7:y:2010:i:1:p:109-124
Contact details of provider: Web page: http://www.elgaronline.com/ejeep

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  1. Stephen P. Dunn, 2001. "Bounded Rationality Is Not Fundamental Uncertainty: A Post Keynesian Perspective," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., 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, M.E. Sharpe, Inc., 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, M.E. Sharpe, Inc., vol. 22(1), pages 3-14, October.
  8. David Dequech, 2007. "Neoclassical, mainstream, orthodox, and heterodox economics," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(2), pages 279-302, December.
  9. Dany Lang & Mark Setterfield, 2007. "History versus equilibrium? on the possibility and realist basis of a general critique of traditional equilibrium analysis," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 29(2), pages 191-209, January.
  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.
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  15. Simon, Herbert A, 1979. "Rational Decision Making in Business Organizations," American Economic Review, American Economic Association, vol. 69(4), pages 493-513, September.
  16. Paul Davidson, 1996. "Reality and Economic Theory," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 18(4), pages 479-508, July.
  17. Arestis, Philip, 1996. "Post-Keynesian Economics: Towards Coherence," Cambridge Journal of Economics, Oxford University Press, vol. 20(1), pages 111-135, January.
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