Re: Paul D. on this year's Nobel--especially V. Smith

[Sven R Larson <slarson@xxxxxxxxxxxx>]

"William B. Ryan" wrote:
> [Ryan]  I suppose you could say that any purposeful action is
> "uncertainty management."  I might concur.  But isn't that something
> quite different than Professor Davidson's concept of fundamental
> uncertainty, or non-ergodicity?

No. As a matter of fact, his contribution in that sense is fundamental
to ANY understanding of uncertainty. What I'm talking about is the
microeconomic implication of macroeconomic uncertainty. Paul D is one
of the 20th century's most influential economists.

> And isn't Davidson's concept
> ultimately a rationale for government intervention since the "hidden
> hand" of the market cannot exist?

That's true especially on the macroeconomic, fiscal policy level. But
in a world of fundamental uncertainty nobody, not even businesses,
likes invisible hands. If the government doesn't provide a visible
hand, then the market will. The market is not always as good as the
government at managing uncertainty, but there is also a limit to
government intervention. Experience tells us that far-reaching
government intervention, of a kind you can see many examples in
Europe, is counterproductive in terms of uncertainty management, in
particular when paired with budget balancing requirements. I discuss
this in my book "Uncertainty, macroeconomic stability and the welfare
state" (Ashgate 2002).

> [Ryan]  By this, it seems you have swallowed the deregulation
> propaganda, hook, line and sinker.

I don't hear your argument.

/srl

--
Dr. Sven R Larson
Department of Economics
Skidmore College
815, North Broadway
Saratoga Springs, NY 12866
(518) 580-5278