Ramsey's critique of Keynes's ‘logical’ approach to probability is widely regarded as decisive, and his own ‘subjective’ approach and SEU framework are now familiar tools in economics. This paper challenges the standard view of Ramsey's critique and assesses the SEU model from a Keynesian viewpoint on probability. It consists of a summary of the two theories and an evaluation of Ramsey's criticisms and alternative. The two main conclusions are that although Keynes yields to Ramsey on the question of the existence (...) of logical probability relations, the formal structure of his theory is compatible with non-objectivist interpretations of probability; and that Ramsey makes far heavier demands on the capacities of the ‘rational agent’ than does Keynes. (shrink)

The financial crisis that began in the US real-estate market in 2007 and culminated in a global economic slump showed bluntly how wrong financial risk models can be. This state of affairs has triggered a number of reactions and observations at the level of the specification and use of models and at a more conceptual/fundamental level. This article focuses on the epistemic features of such models – namely the nature, source, conditions of validity, structure and limits of the knowledge that (...) ‘well-specified’ models generate – so as to assess models in a balanced way, giving due weight to the fundamental determinants of their output and warning against overestimation of their possibilities; clarify the conditions under which models can be validly applied to economic and social relationships; render intelligible why the degree of accuracy that successful models would require is intrinsically unattainable; better understand models’ failure as evidenced by the crisis; and comment on the policy steps being undertaken to prevent similar financial crisis in the future. The analysis applies the principal tenets of critical realism to the daily preoccupations of risk management professionals and financial regulators alike. It is not intended as an intervention into critical realism. It draws on the works of Tony Lawson and Roy Bhaskar, and revisits relevant aspects of John Maynard Keynes’s work, connecting dots amongst them and marrying economic and philosophical analysis with day-to-day financial risk management and regulatory issues. Content Type Journal Article Category Article Pages 462-486 DOI 10.1558/jcr.v11i4.462 Authors Mattia L. Rattaggi, UBS/Cambridge Social Ontology Group Journal Journal of Critical Realism Online ISSN 1572-5138 Print ISSN 1476-7430 Journal Volume Volume 11 Journal Issue Volume 11, Number 4 / 2012. (shrink)

This paper supports the contention that the general rules introduced by Hume in the Treatise on Human Nature (THN 1.3.15) are a selection mechanism for inductive inferences, which rejects two sources of inefficiency : (i) from emotional origin, which would reduce the uneasiness coming from a possible failure in the uniformity of nature ; (ii) from cognitive origin, which would tolerate the possible overflow of the imagination on judgment. A growing consensus in recent decades, which distinguishes between two kinds of (...) rules — extensive and corrective — is at the basis of this device. Whereas the extensive rules allow us to go beyond a singular experience and derive a wider range of inferences, the corrective rules, whose command opposes the philosopher to the vulgar, control and rectify the effects of extensive rules alone, so as to eliminate emotional and cognitive inefficiencies, and to make inferences that, borrowing the expression to Peirce, we will designate as abductive. (shrink)

In Chapter 12 of the General Theory, on “The State of Long-Term Expectation,” Keynes writes: “It would be foolish, in forming our expectations, to attach great weight to matters which are very uncertain”. In a footnote to this sentence, Keynes points out that by “very uncertain” he does not mean the same as “very improbable” and refers to the chapter on “The Weight of Arguments” in his earlier Treatise on Probability. The purpose of this article, in the first place, is (...) to provide an account of, and to sort out the relations between, Keynes's views on probability, uncertainty, and the weight of arguments. (shrink)

What role, if any, should the government perform in a society? Two very different answers to this question have been provided by John Rawls and Robert Nozick. For Rawls, the government plays an important role in ensuring that the principles of justice are realized in the workings of society. For Nozick, the role of government is limited to that of providing protection. The debate over these two views has led to the questioning of the entire liberal doctrine, a questioning that (...) has taken place not only within intellectual circles, but also within the society at large. (shrink)

On Keynes's Method, Anna Carabelli and Keynes: Philosophy, Economics and Politics: The Philosophical Foundations of Keynes's Thought and Their Influence on His Economics and Politics, Roderick M. O'Donnell.