How do we make decisions in the real world? It’s an important question because economic theory says, in essence, that we don’t really need to make decisions at all, because according to the assumptions of both neoclassical and neoliberal economics, we have perfect knowledge. In other words, we know everything now, and in the future, and as a consequence, why would we need to make a decision, because the world is optimal?
Now, obviously, this is complete nonsense. There’s no beating around the bush here. The whole of economic theory is based upon this stupid assumption, and most of the papers that are published in most of the serious economic journals in the world do in some way relate back to this absurd claim.
Given that economics doesn;t make the assumption of perfect knowledge Spud’s wholly correct that this is complete nonsense. Even if not in quite the manner that Spud thinks.
Sigh.
So this isn’t a minor issue. It’s a fundamental problem within the vast range of economic theory that is produced every year by our universities, but which informs the decision-making of people like the UK Treasury and the Bank of England. They assume that we have this perfect knowledge and that there is no difference between risk and uncertainty, but in the real world there is.
The real world is uncertain. In other words, we do not know what is going to happen. We cannot appraise all the possibilities. We can’t attribute probabilities to their outcomes. We simply live in a fog. There’s nothing wrong with that. That doesn’t imply that we are somehow inferior beings. It just means that reality isn’t the same as the economic models that are used by economists to make predictions, which are wholly unrelated to reality.
There are entire libraries full of economists making the distinction between risk and uncertainty.
It’s a joy to read when he get to philosophisin’ like this. It’s just breathtaking to see someone so fucking stupid.
Agreed Jimmers. It’s especially good when he “discovers” something that the rest of the world has apparently missed.
But… but… I thought that this was the core assumption of socialist central planning, that our *GLORIOUS LEADERS* have perfect knowledge?
No one can accuse ‘Professor’ Murphy of having perfect knowledge.
Odd that with perfect a perfect view of the future multiple firms can set out to solve a problem and make money yet inexplicably choose different directions to do so. He’s right there, it’s demonstratably nonsense. Of course those different directions lead to some of those firms being a success and some failing and that’s how the system often ends up with a solution that fits, not with magic foresight. Does he not understand that trial and error can be done in parallel and not just serial which is the way of central planning? And did I just ask a rhetorical question?
Southerner
Today is Sunday.
Looks like he’s discovered that their is no such as an economy. It’s word made up by economists. At the granular level, any economy is made up of individuals, all with different opinions of information & making individual choices according to their needs.
But isn’t that going to cut the floor out from under most of his economic ideas?
“most of the papers that are published in most of the serious economic journals in the world do in some way relate back to this absurd claim.”
Right there Is the angle he’s coming from. The genius and multiple times professor Richard Murphy has never* had a paper published in an economic journal therefore everything they publish must be nonsense.
*I don’t know that and won’t be looking it up but I’ll wager a kidney on it
Just seen this over at D Mitchell’s place on how the communist brain works and instantly thought of spud
Commie dick Murphy wants GOVERNMENT to make all the decisions.
‘It’s an important question because economic theory says, in essence, that we don’t really need to make decisions at all’
He’s been reading Marx again.
No one can accuse ‘Professor’ Murphy of having
perfectknowledge.Fixed it for you.