Keynes’s Logical, Objective, Relation of Probability, P(a/H)=α, Where α is a Degree of Rational Belief, Has Nothing to Do with Truth: Both Orthodox and Heterodox Economists Fail to Realize that there is No Such Thing as a True Probability, True Expectation, or True Expected Value
31 Pages Posted: 25 Sep 2019
Date Written: September 8, 2019
Keynes’s logical, objective, relation of probability, P(a/h)=α,where α is a degree of rational belief, has nothing to do with truth or falsehood. Probability is not truth. The belief that a probability, expectation or expected values can be true (false) appears to involve the same kind of error pointed out by George Box regarding statistical models, that “all models are wrong, but some are useful.” Orthodox rational expectation theorists appear to believe that there are true rational expected values, true statistical models and true, objective probabilities, which rational decision makers can know.There is no support in any theory of probability for such beliefs. Heterodox economists are no better and make the same error.
Keynes, in his conclusion to chapter 26 of the A Treatise on Probability, pointed this out and emphasized that rational decision making has nothing to do with the truth. Probability has nothing to do with the truth. The idea that there are true objective probabilities or that probabilities can be correct, right and valid is an oxymoron.
Keywords: probability, truth, expectations, chapter 26, uncertainty versus risk, near future versus distant future
JEL Classification: B10, B12, B14, B16, B20, B22
Suggested Citation: Suggested Citation