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Addressing uncertainty in economics and the economy

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  • Sheila C. Dow

Abstract

This article explores the way society in general and economists in particular deal with fundamental uncertainty. It is argued that uncertainty is interdependent with the evolution of institutions and behaviour, including that designed to help society cope with uncertainty. Whilst some mainstream theory does address uncertainty, it employs a much narrower concept than fundamental uncertainty. Generally, in spite of the evident increase in fundamental uncertainty during the crisis, most mainstream theory ignores it. Although ignoring uncertainty can sometimes be a successful coping mechanism, it is argued that, as a blanket coping mechanism, ignoring uncertainty seriously limits the realism of theory and therefore also practice and policy. It is concluded that economists should embrace uncertainty by tailoring methodologies and theories to address it. This would provide a more fruitful basis for policy aimed at reducing uncertainty in the economy and also reducing our own uncertainty.

Suggested Citation

  • Sheila C. Dow, 2015. "Addressing uncertainty in economics and the economy," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(1), pages 33-47.
  • Handle: RePEc:oup:cambje:v:39:y:2015:i:1:p:33-47.
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    File URL: http://hdl.handle.net/10.1093/cje/beu022
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    Cited by:

    1. John B. Davis, 2017. "The Continuing Relevance of Keynes's Philosophical Thinking: Reflexivity, Complexity and Uncertainty," Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science, Fondazione Luigi Einaudi, Torino (Italy), vol. 51(1), pages 55-76, June.
    2. Pugno, Maurizio, 2020. "Enjoying life takes time and needs people, but economic progress runs and offers things," MPRA Paper 104378, University Library of Munich, Germany.
    3. Edgardo Bucciarelli & Nicola Mattoscio, 2021. "Reconsidering Herbert A. Simon’s Major Themes in Economics: Towards an Experimentally Grounded Capital Structure Theory Drawing from His Methodological Conjectures," Computational Economics, Springer;Society for Computational Economics, vol. 57(3), pages 799-823, March.
    4. Tommaso Bertolotti & Lorenzo Magnani, 2015. "Contemporary finance as a critical cognitive niche," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 14(2), pages 273-293, November.
    5. Strong, Derek Ryan, 2017. "The Early Diffusion of Smart Meters in the US Electric Power Industry," Thesis Commons 7zprk, Center for Open Science.
    6. David Dequech, 2016. "Some Institutions (Social Norms And Conventions) Of Contemporary Mainstream Economics, Macroeconomics, And Financial Economics," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 006, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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