Uncertainty—in retrospect

Published on Real-World Economics Review Blog, by David Ruccio, August 14, 2012.

Uncertainty is all the rage right now, with a wide variety of economists and central bankers “discovering” its disturbing effects in the midst of the current crises of capitalism.

But I’ll bet it’s just a passing fad. As soon as things return to normal, uncertainty will be put back on the shelf and, once again, be tamed and domesticated. 

As I’ve shown many times over the last few years, the failure of mainstream economics has prompted a rediscovery of uncertainty—not unlike during the First Great Depression when Keynes argued that investors were subject to fundamental uncertainty (as against probabilistic risk) and therefore guided not by rational calculation but by “animal spirits.”*

*This is radically different from the current mainstream-economists-for-Team-Republican focus on policy uncertainty, which is just another way of arguing for continuing the Bush-era tax cuts for wealthy individuals and large corporations. Mike Konczal does a good job taking apart the mainstay of their approach, the economic policy uncertainty index.

The latest to announce the relevance of uncertainty is Andy Haldane [ht: sb], Executive Director for Financial Stability at the Bank of England—who, according to Ismail Erturk et al., has become the bank’s “radical house intellectual who, through his interventions after the crisis, has become the darling of the intelligentsia.”

On one hand, there’s something refreshing about Haldane’s critique of mainstream economics … //

… In Haldane’s world, uncertainty is a problem that can be explained (with the correct set of models) and then used (e.g., by the Bank of England) to create a new kind of regulatory authority. It is precisely not an issue of “undecidability” or “indeterminacy” that challenges the pretenses and protocols of modern economic knowledge.

Thus, I am quite certain that, once again, it will be put back in the box—once Haldane and others believe that the gust of wind has passed, the regulators’ control has been reasserted, and the banks return to business as usual. (full text).

Links
:

Replay: Top six ways Obama and the Democratic Party allowed a resurgence of the Republicans – How Dems Allowed the Tea Party to Rebrand the GOP, 8.54 min, published on TRNN (watch full multipart commentary by Paul Jay – first published days before the 2010 elections).

The Fraud-lympics and Kansas GOP Moves Way Right, 16.20 min, on TRNN, August 15, 2012.

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