Lars P. Syll — Dutch books and money pumps

According to Keynes we live in a world permeated by unmeasurable uncertainty – not quantifiable stochastic risk – which often forces us to make decisions based on anything but rational expectations. Sometimes we ‘simply do not know.’ Keynes would not have accepted the view of Bayesian economists, according to whom expectations “tend to be distributed, for the same information set, about the prediction of the theory.” Keynes, rather, thinks that we base our expectations on the confidence or ‘weight’ we put on different events and alternatives. To Keynes, expectations are a question of weighing probabilities by ‘degrees of belief,’ beliefs that have precious little to do with the kind of stochastic probabilistic calculations made by the rational agents modelled by Bayesian economists.

Lars P. Syll’s Blog
Dutch books and money pumps
Lars P. Syll | Professor, Malmo University