Keynes begins his argument by comparing the Ricardian economic analysis with Marshall’s economic-views. According to Keynes, the Ricardian analysis focuses on long term equilibrium while Marshall sought to refine the former economic principle. However, the article notes that both the Ricardian analysis and Marshall’s principles recognize the existence of fundamental uncertainty in economics.
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The author also notes that modern economic scholars have made contributions that seek to unravel the uncertain factors in the course of economic progress. Some of these factors include unfair competition, monopoly, and capitalistic dynamics. Keynes argues that the uncertainties that are addressed by key modern economists “are known more or less for certain” (Keynes 1).
Consequently, fundamental uncertainties are the expectations that are impossible to calculate and quantify in exact actuarial terms. Keynes also argues that the element of probability is meant to reduce the aspect of fundamental uncertainty. Other economic concepts that have a direct influence on fundamental uncertainty include Benthamite-calculus and its influence.
According to Keynes, when making economic decisions uncertainty issues play a big role. Therefore, human beings do not have a definite idea of what the consequences of their actions are. Keynes argues that even though it is possible to ignore the more unlikely consequences of individual actions, time and chance factors might make them important. Nevertheless, at times, human beings are intensely concerned with these fundamental uncertainties.
When the concern that stems from uncertainties is heightened, it has a direct impact on human economic actions. According to Keynes, wealth is an economic factor that has a direct connection to fundamental uncertainty. Wealth creation strongly depends on economic forecasts and future results. All decisions concerning wealth accumulation are related to fundamental uncertainty.
Keynes notes that the principles that help human beings to make decisions in an uncertain world are not necessarily the ones that distinguish “what is known for certain from what is only probable” (Keynes 1).
Uncertainty in the context of decision-making principles refers to the events whose probability cannot be scientifically calculated. Therefore, making decisions in an uncertain environment requires individuals to overlook the influence of what they do not know. Individuals will often follow their instincts and act while basing their actions on known economic theories.
The writer claims that human beings have devised ways of making decisions in times of uncertainty. According to Keynes, these ways are meant to give ‘uncertain-ways’ economic validity. One of how individuals make decisions in an uncertain world is by assuming that the present is a reliable guide when making future predictions. Individuals tend to ignore unexpected future changes when making decisions.
Another way in which individuals make future decisions is by relying on the current state of affairs and assuming that trends can only change if something new and better comes along. Keynes also argues that individuals recognize that their judgment is ‘worthless,’ and they tend to rely on the views of the rest of the world. When individuals dismiss their judgment and rely on that of others, they are often under the assumption that the rest of the world is better informed.
This behavior highlights the need for human beings to conform to the average or majority economic behaviors. Keynes notes that “the psychology of a society of individuals, each of whom is endeavoring to copy the others leads to what we may strictly term as a conventional judgment” (Keynes 1).