The 'Uncertainty' Fraud: Joan Robinson, G. L. S. Shackle and Paul Davidson's Sleight of Hand Change of Keynes's Uncertainty Definition in the General Theory
32 Pages Posted: 13 Nov 2017
Date Written: November 10, 2017
J. M. Keynes gave an exact and precise definition of his concept of uncertainty in the General Theory. Keynes stated that uncertainty was an inverse function of the weight of the evidence on page 148 of chapter 12 of the General Theory. The weight of the evidence concept was carefully discussed and modeled by Keynes in chapters 6 and 26 of the A Treatise on Probability. The fundamentalist Keynesians, such as Joan Robinson, G. L. S. Shackle and Paul Davidson, had no idea about what Keynes was talking about because none of them had the academic training in mathematics and logic that would have enabled them to understand what the weight of the evidence, w, is or how it is different from the Evidential Weight of the Argument, V. Robinson, Shackle and Davidson then resorted to a sleight of hand. They claimed Keynes had changed his mind about the definition and meaning of uncertainty in his 1937 Quarterly Journal of Economics reply to mean “we simply do not know”, rather than uncertainty being an inverse function of the weight of the evidence as defined on p.148 of the General Theory in chapter 12. The change is monumental because it changes the meaning of uncertainty from being a range, defined on the interval between 0 and 1,0 ≤ w ≤ 1, where w is the weight of the evidence, to being w=0, which is the case of complete ignorance. The terms radical, fundamental, and irreducible uncertainty mean total and compete ignorance. This sets up the Shackleian claim that either you know everything, which is the case of certainty or certain knowledge, or you know nothing, which is his case of uncertainty or no knowledge, because “un” mean no. There is nothing in between. There are no gradations or degrees of uncertainty. This sleight of hand is the “uncertainty” fraud. It leads to the rejection of Keynes’s IS-LP(LM) model in chapters 15 and 21 of the General Theory, based on the claim that the existence of pervasive radical, fundamental, irreducible uncertainty makes any kind of formal logical, statistical, probabilistic, or mathematical modeling impossible. It is easy to show that Keynes never changed his mind about the definition of uncertainty in his 1937 Quarterly Journal of Economics reply because he continues to insist that there are degrees of uncertainty and that the neoclassical model of the rate of interest is incorrect because there is one equation missing from their model-the Liquidity preference function that Robinson, Shackle, and Davidson claim did not exist.
The Uncertainty Fraud is the foundation for the Post Keynesian School of economics.
Keywords: Robinson, Keynes, Is-Lm, Liquidity Preference, Weight, Chapter 15, Pp. 180-182 Of Gt, Chapter 21, Pp. 297-303
JEL Classification: B10, B12, B14, B16, B20, B22
Suggested Citation: Suggested Citation