 Probability and Rationality in EconomicsRobin Rowley Chapter 5 in Economic Theory, Welfare and the State, 1990, pp 87-99 from Palgrave Macmillan Abstract: Abstract Many years ago, Knight (1921) insisted that ‘if we are to understand the workings of the economic system we must examine the meaning and significance of uncertainty; and to this end some inquiry into the nature and significance of knowledge itself is necessary’. He provided a simple distinction between risk and uncertainty, in which the former was identified with the existence of probability distributions, but this distinction proved inadequate as probabilistic concepts were expanded and as their connections with knowledge were clarified. Further the vagaries of individual decisions produced a conflict between views that the axioms of probability were descriptive and those that stressed rationality, sometimes in a prescriptive sense. Other conflicts emerged as important qualifications to the application of probability were ignored and as the number of different conceptions of probability grew. Qualifiers such as objective and subjective lost their meaning. Keywords: American Economic Review; Subjective Probability; Rational Expectation; Royal Statistical Society; Certainty Equivalent (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-10911-1_5 Ordering information: This item can be ordered from DOI: 10.1007/978-1-349-10911-1_5 Access Statistics for this chapter More chapters in Palgrave Macmillan Books from Palgrave Macmillan |
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