On Uncertainty in Keynesian Macroeconomics and German Ordnungstheorie

Abstract

The debate on Keynes glossed over his intention to replace classical economic theory by an approach considering the fact of uncertainty in the sense of “there is no scientific basis on which to form any calculable probability whatever. We simply do not know” (Keynes 1937, p. 214). Keynes takes this into account by replacing the (neo-)classical assumption of perfect rational optimizing behavior by psychologically justified behavioral assumptions. As for the rest, he hangs on to the neoclassical model in a “macroeconomic” sense. Later developments based on the micro foundations of macroeconomics disregard the Keynesian uncertainty problem entirely. Given that uncertainty, Keynesians have not much choice but to accept the older social control style of David Hume, also applied by German Ordnungstheorie (system theory) - and there are no reasons for Keynesians to turn their backs on German Ordnungstheorie.