Re: Some questions

[Paul Davidson <PB108928%UTKVM1.BITNET@xxxxxxxxxxxxxxxxx>]

FROM:  Paul Davidson
"      Economics Department
"      523 Stokely Management Center     974-4221
Dear Doug Henwood: The precis of my argument is that it can be demons=
trated tha
t Austrian economists in general believe in an immutable external rea=
lity, i.e
in  what classical economists would call a reality described by "obje=
ctive
probabilities". This is what Samuelson calledc the "ergodic hypothesi=
s" --an hy
pothesis that Smuelsoin declares is essential for making economics a =
science!
The main difference between New clasi=E3sical economists and Austrian=
s is that th
e former believe that humans have the capability to use market data t=
o calculat
e subjective probabilities that are equal to objective probabilities =
(and there
fore obtain statistically reliable information about thew immutable e=
xternal
reality. The Austrians believe that humans do not have sufficient int=
ellect and
/or computing power to make completely reliable estimates of these ob=
jective
 probabilities. Instead they rely on the "maket" as a huge "Turing ma=
chine" tha
t can interpret existing market data into reliable information about =
the
immutable reality. To versimplify -- as a precis must -- uncertainty =
for Austri
ans merely implies a large (infinte?) variance for any single humans =
subjective
probability, while New Classicals believe that the variance is finite=
 and     s
ufficiently small that rational expectations are statistically reliab=
le! Keynes
 and the Post Keynesians, on the other hand, believe in a transmutabl=
e or
creative external reality -- where the future is created by human act=
ions today
 and in the futurre. Accordingly, current market data can not reflect=
 future be
havior. This is what I have labelled a nonergodic environment. All th=
is is spel
led out in greater detail and clarity (I hope) in the citations I gav=
e. Paul Da
vidson
=20
Have a good day!