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Ergodic Versus Uncertain Financial Processes – Part II: Neoclassical and Institutional Economics


  • Móczár, József


The science of economics should focus its research on increasing the prosperity and well-being of mankind, wherein priority should be given to the achievement of an equilibrium, the distribution of income, and the understanding of the future. Its objectives include the development of proposals for economic policy to facilitate the harmonious development of both society and the economy. Debated between mercantilists and physiocrats as early as the 17–18th centuries, the role of the market and the government remains questionable to this day. Classical economists relied on a fatalistic intuition in explaining the role of the market, arguing that market mechanisms would automatically create an equilibrium in the long term, regardless of the initial conditions. In the 19th century, Boltz-mann put forward a similar principle in thermodynamics: the ergodic hypothesis. In the first part of this article, I reported the research findings that I had made in the project Ergodicity in the theory of finance. Part II offers an analysis of the emergence of neoclassical and institutional economics, their schools, and their differences in addressing ergodicity. Neoclassical economists expanded their unrealistic assumptions further, Samuelson being the first to incorporate the ergodic hypothesis into his model, followed by Black and Scholes, and finally Lucas and Sargent, denying the role of the government. They were opposed by institutional economists, headed by Keynes, who denied that the future would be a shadow of present and past data, arguing that as financial processes were inhomogeneous and their forecasts were uncertain, the government played a significant role. My analyses modernise and complement the Samuelson–Nordhaus family tree of economics. I analyse the citation counts of Nobel Prize laureates in neoclassical and institutional economics based on calculations using a modified Bass model, and compare their counts to those of the main classics. Finally, in reference to Piketty’s analyses, I propose the reintegration of the economy and ethics both in research on theoretical economics and in socio-economic practice. Moreover, I propose the development of a new theory on income distribution that follows changes in property rights.

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  • Móczár, József, 2017. "Ergodic Versus Uncertain Financial Processes – Part II: Neoclassical and Institutional Economics," Public Finance Quarterly, Corvinus University of Budapest, vol. 62(4), pages 478-501.
  • Handle: RePEc:pfq:journl:v:62:y:2017:i:4:p:478-501

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    References listed on IDEAS

    1. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66(6), pages 467-467.
    2. Allais, Maurice, 1997. "An Outline of My Main Contributions to Economic Science," American Economic Review, American Economic Association, vol. 87(6), pages 3-12, December.
    3. Till Düppe & E. Roy Weintraub, 2014. "Finding Equilibrium: Arrow, Debreu, McKenzie and the Problem of Scientific Credit," Economics Books, Princeton University Press, edition 1, number 10206.
    4. Daron Acemoglu & James A. Robinson, 2015. "The Rise and Decline of General Laws of Capitalism," Journal of Economic Perspectives, American Economic Association, vol. 29(1), pages 3-28, Winter.
    5. Carlos Góes, 2016. "Testing Piketty’s Hypothesis on the Drivers of Income Inequality: Evidence from Panel VARs with Heterogeneous Dynamics," IMF Working Papers 2016/160, International Monetary Fund.
    6. Punzo, Lionello F., 1991. "The School of Mathematical Formalism and the Viennese Circle of Mathematical Economists," Journal of the History of Economic Thought, Cambridge University Press, vol. 13(1), pages 1-18, April.
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    More about this item


    ergodic hypothesis; fatalistic intuition; ergodic stochastic financial processes; neoclassical economics; institutional economics;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)


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