Re: Paul D. on this year's Nobel

[James Juniper <James.Juniper@xxxxxxxxxxxx>]

Dear Gary,

I agree with the points you raise below. The issue of moving beyond the
constraints imposed by certain behavioural axioms can obviously be  separated
in logical terms from the issue of whether the underlying stochastic process is
ergodic or non-ergodic. However, the issue of whether any kind of axiomatic
approach to decision-making is appropriate can also become the subject of
debate.

On a more general level I know many post Keynesians who refuse to have anything
to do with utility theory. I prefer to look upon utility theory as a "necessary
evil" in the sense that any control and filtering problem (as in cost-benefit
analysis) requires some kind of penalty function. Of course, having said that,
after rejecting Wicksellian analysis and marginal productivity theories of
income distribution we also know, from the Mantel-Debreu-Sonnenschein lemma,
that the excess demand functions used in Neo-Walrasian tatonnement don't have
much to do with the microfoundations of individual choice.

(and my apologies to Mat for following those who have strayed from his question
about Smith!)

Cheers,

James
-----Original Message-----
From: mongiovg [mailto:mongiovg@xxxxxxxxxxx]
Sent: Friday, 11 October 2002 0:49 AM
To: James Juniper; Paul Davidson
Cc: pkt
Subject: Re: Paul D. on this year's Nobel


>
>all of the above analysis, James, still requires the ERGODIC AXIOM (or the
>ordering axiom) and hence are logically incompatible with the concept of
>fundamental uncertainty.

My impression of this work -- and I'm sure no expert on it -- is that it is
concerned with how real-world human beings make choices in real-world
situations. In this respect it strikes me as interesting and useful. In some
respects it is subversive of neoclassical orthodoxy, since it calls into
question the axioms of choice upon which conventional demand functions rest.

I'm not sure how wedded these insights are to what Paul calls the "ergodic
axiom". The work suggests that the economist's conception of "rationality"
doesn't reflect how human beings actually make decisions. This in itself
hasn't got anything to do with ergodicity, as far as I can see.  To the extent
that behavioral economists share an essentially neoclssical understanding of
market processes, their work no doubt contains trace elements of the kind of
reasoning to which Paul objects.  But those elements seem to me to be
incidental to, and distinct from, the behavioral insights, which stand alone
(and which may or may not be sound in themselves).

Regards,

Gary

>
>Paul
>Paul Davidson
>Editor, Journal of Post Keynesian Economics
>503 SMC
>University of Tennessee
>Knoxville, Tn 379996-0550
>phone Number: (865) 974-4221
>fax number: (865) 974-1686
>http://econ.bus.utk.edu/davidsonextra/Davidson.html