A Post Keynesian Appreciation of a Reconstruction of Economics

Abstract:

Kenneth Boulding, in A Reconstruction of Economics (1950) for a population perspective as the foundation of economic theory, argued that a reconstruction of economics is required to address the problem of true uncertainty. The microeconomic side of this argument is elaborated here, exploring the limitations of marginal analysis in the face of uncertain windfall gains and losses. A comparison of renewable and nonrenewable resource populations demonstrates that potential windfall gains and losses may bias decision-making, despite true uncertainty regarding their likelihood. This approach is shown to be related to Keynes’s analysis of liquidity preference in the face of true uncertainty.

Key Words::

• choice under uncertainty
• Post Keynesian microfoundations
• systems economics