Re: Uncertainty and Liquidity Preference

["John M. Legge" <jlegge@xxxxxxxxxx>]

Ian,

The changes from day to day (or year to year) are multiplicative, not additive.  By iteration, if tomorrow is rather like today, the day after tomorrow will be rather like tomorrow, but (in all probability) the day after tomorrow will be less like today than tomorrow is, and so the differences grow (at the risk of inflaming Paul, exponentially with a Lyapunov exponent).

Our predictive capacity is non-linear with time, as indicated by the unbounded growth of the standard deviation associated with any prediction.

JML

----- Original Message -----
From: Lisa & Ian Murray <seamus@xxxxxxxxxxxxx>
To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
Sent: Tuesday, 13 July 1999 14:53
Subject: RE: Uncertainty and Liquidity Preference


> Doesn't this bias our sense of uncertainty towards merely sorites paradox
> types of ignorance.  Surely our problems of uncertainty are greater than
> mere additivity?  if the economic world is non-linear and non-ergodic, then
> surely our theory of ignorance, and error correction (improving predictive
> capacity) as well as errors in tracking it (the economy) must be non-linear
> as well?
>
> Ian
>