PKT message, Re: Probability And Economics

It is very interesting that you should raise the position of Einstein about quantum mechanics. He said 'God doesn't play Dice' meaning that there was a hidden parameter that if known would transform the apparent random behaviour into a deterministic behaviour.

In the case of Economy would Macro Economist take in account the Standard Deviation of Revenues or Assets the System would become deterministic.

It would explain;

- The increase of poverty while the GNP of rich countries increases.

- The inflation of the Asset Price Bubble.

- The decrease of inflation and the deflation while the GNP of rich Countries increases.

- The sudden invalidity of the Phillips Curve.

- The steady decrease of long term interest rate.

- The inevitable fall in Keynes Liquidity trap of a Capitalist Economy which is one case of the free market economy.

So the replay of the 1929 Crash is not probable it is Certain.

Shalom Patrick Hamou

----- Original Message -----

From: Gunnar Tomasson

To: POST KEYNESIAN THOUGHT

Sent: Friday, December 22, 2000 11:24 PM

Subject: Probability And Economics

Recent exchanges on uncertainty, probability etc. raise an important question:

What does probability have to do with theoretical economics?

While Einstein may have been in a minority of one among his peers in suggesting that the probability calculus and associated non-deterministic view of quantum mechanical phenomena was predicated on ignorance with respect to the behaviour of non-probabilistic individual "systems" as distinct from ensembles thereof, there was never any question that, in the context of quantum mechanics, use of the probability calculus yielded predictions whose accuracy was unsurpassed.

Considering that use of the probability calculus in quantum mechanics is sanctioned by predictive accuracy, what would justify its use in would-be economic models of - by QM standards - risible predictive accuracy?

Gunnar