Uncertainty and Probability in Institutional Economics
Philosophical theories of the nature and meaning of probability can be distinguished from the mathematics of probability theory. The latter subject is not particularly conttoversial. However, there are different theories of the meaning of probability, and these theories involve corollary notions about under what circumstances probabilistic calculation is or is not meaningful as a guide to human conduct. The problem of uncertainty then is n~t strictly a mathematical problem. It involves the meaning of probability and its relation to intentional behavior. Over the history of thought regarding the nature of probability, there has been a broad range of such conceptions (Hacking 1975). One might include at least the following categories: (i) probabilities are a priori degrees of rational belief; (ii) probabilities are subjective assessments of risk; (iii) probabilities are ex post empirical frequencies; and (iv) probabilities are real propensities, which exist in nature. Which concepts of probability, and corollary concepts of uncertainty, are appropriate for institutional economics? At least since the 1990s, if not earlier, post Keynesian uncertainty concepts have played a role in institutional economics (e.g., Minsky 1996; Ferrari-Filho and Concei<;:ao 2005; Dequech 1999; 2000a; 2000b; 2001; 2003a; 2003b; 2003c; 2004; 2005a; 2005b). The following quote from a recent article in the Journal of Economic Issues captures the flavor of this influence: