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Uncertainty: A diagrammatic treatment

Sheila Dow

No 2015-36, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: In spite of superficial similarities, the way in which uncertainty is understood as a feature of the crisis by mainstream economics is very different from Keynesian fundamental uncertainty. The difference stems from the mainstream habit of thinking in terms of a full-information benchmark, where uncertainty arises from ignorance. By treating uncertain knowledge as the norm, Keynesian uncertainty theory allows analysis of differing degrees of uncertainty and the cognitive role of institutions and conventions. The paper offers a simple diagrammatic representation of these differences, and uses this framework to depict different understandings of the crisis, its aftermath and the appropriate policy response.

Keywords: uncertainty; risk; ambiguity; Keynes (search for similar items in EconPapers)
JEL-codes: B41 B5 E00 G01 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-hme, nep-hpe, nep-mac and nep-pke
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http://www.economics-ejournal.org/economics/discussionpapers/2015-36
https://www.econstor.eu/bitstream/10419/110921/1/827387695.pdf (application/pdf)

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Journal Article: Uncertainty: A diagrammatic treatment (2016) Downloads
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