Julio Huato wrote: > This, of course, leads to the key question splitting Keynesians from > Classicals: Do correct asset prices exist independently of the pricing > mechanism itself (financial markets)? Keynes (GT, 12) argues > compelling that they don't. I say it doesn't matter. I'm not moved > by Keynes appeal to convention (the ergodic assumption).
Isn't it conventional (orthodox) economics that assumes ergodicity? According to Paul Davidson, who should know, it's Keynes who rejected ergodicity. For those outside the club, "ergodicity" (following Davidson) refers to an imaginary world where the sum of the probabilities of all possible events equals 100%. For Keynes, on the other hand, in the real world there is always a margin of uncertainty, where there exist some unknown possible events with unknown probability, so that the sum is less than 100%. "Black swans" can and do occur. > It's [convention is] a deux ex machina. Where do conventions come from? Do > they adjust over time? If they do, how? ... < Where do conventions come from? do they fall from the sky? are they innate in the mind? No, they come from social practice and from nowhere else. People make them. By the way, the conventions that Keynes referred to are hardly complex. They represent such things as people acting on the assumption that they can extrapolate from the past to understand the future. Or the assumption that the vast majority of exchanges with those who have good reputations (e.g., Madoff) do not involve fraud. These kinds of assumptions are needed because of the uncertainty we face. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
