Realidad y teoria economica

Reality and Economic Theory Author(s): Paul Davidson Source: Journal of Post Keynesian Economics, Vol. 18, No. 4 (Summer, 1996), pp. 479-508 Published by: M.E. Sharpe, Inc. Stable URL: http://www.jstor.org/stable/4538504 . Accessed: 12/03/2011 12:03
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PAUL DAVIDSON

Reality and economictheory
When discussing theimplicationsof uncertainty economic activity on differencesamongvarious and its policy implications,the fundamental economic theories involve (1) the analyst's conceptionof the external economic realityin which decision makersoperate,and (2) the ability that of agents to understand reality. 1. Reality: predetermined, immutable, and ergodically knowable or nonergodic, unknowable, and transmutable? By assumingthat economic agents operated in a world of perfect classicaleconomistspresumedthatagents nineteenth-century certainty, a programmedexternal economic reality that hadfull knowledge of governedall past,present,andfutureeconomicoutcomes.The external in economic environmentwas immutable that it was not susceptibleto inducedby humanaction.Thepathof the economy, like the path change by of theplanetsunderNewton's classical mechanics,was determined timeless, immutablenaturallaws. econoWhile rejectingthe perfectcertaintymodel, most mainstream miststoday,following SamuelsonandLucas,acceptas a universaltruth the existence of a predetermined realitythat can be fully describedby unchanging objective conditional probabilityfunctions.' Reality is, therefore,immutable;the futurepath of the economy andthe future
The authoris holderof the Holly Chairof Excellence in Political Economyat the Universityof Tennessee. He is indebtedto SalvatoreVecchuccio for informationregardingthe relationshipbetween Liouville's Theoremand ergodictheoryand to PhilipArestisfor some useful comments. I Samuelson(1969, pp. 104-105) and Lucasand Sargent(1981, p. xii) have made realitya necessaryconditionfor scientificmethodthe assumptionof a predetermined discussion, see sections 2 and6 below. Arrowand ology in economics. For a further conditionalmarketsto determineall future Debreurequirea full set of probabilistic outcomes.
Journal of Post KeynesianEconomics/ Summer 1996, Vol. 18,No.4 479

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conditionalconsequencesof all possiblechoices arepredetermined (i.e.,programmed naturallaws). This does not precludean economy that by is moving or changingovertime. It does meanthatall futuremovements and changes arealreadypredetermined the fundamental paramby real eters of the system and cannotbe changedby humanaction. Time is a device thatpreventseverythingfromhappeningat once. The expectationalforecastsof decision makersplay an essentialrole whenever the outcome...