Keynes's Non-Numerical Probabilities and Non-Additive Measures

Posted: 29 Dec 2008

See all articles by Marcello Basili

Marcello Basili

University of Siena - Dipartimento di Economia Politica; University of Siena - Department of Economic Policy, Finance and Development

Carlo Zappia

University of Siena - Department of Economics and Statistics

Date Written: November 30, 2008

Abstract

This paper argues that a representation of the epistemic state of the individual through a non-additive measure provides a novel account of Keynes's view of probability theory proposed in the Treatise on Probability. The paper shows, first, that Keynes's non-numerical probabilities can be interpreted in terms of decision weights and distortions of the probability priors. Second, it is argued that the degree of non-additivity of the probability measure can account for the confidence in a probability assessment without any reference to a second order probability, as suggested by Keynes's notion of weight of argument. And, third, it is identified a criterion for decision making under uncertainty developed in the non-additive literature that incorporates a measure of the degree of confidence in the probability assessment. The paper aims to substantiate the view, put forward in a recent paper in this journal, that Keynes's analysis of uncertainty has continuing relevance to decision theory and can provide the foundations for a theory of decision making under uncertainty that is arguably more general than subjective expected utility theory.

Keywords: ambiguity, uncertainty, probabilities, Keynes

JEL Classification: B16, D81

Suggested Citation

Basili, Marcello and Zappia, Carlo, Keynes's Non-Numerical Probabilities and Non-Additive Measures (November 30, 2008). Journal of Economic Psychology, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1321448

Marcello Basili

University of Siena - Dipartimento di Economia Politica ( email )

Piazza San Francesco 7
Siena, 53100
Italy

University of Siena - Department of Economic Policy, Finance and Development ( email )

Piazza San Francesco, 7
Siena, 53100
Italy

Carlo Zappia (Contact Author)

University of Siena - Department of Economics and Statistics ( email )

Piazza San Francesco 7
Siena, Siena 53100
Italy

HOME PAGE: http://docenti-deps.unisi.it/carlozappia/

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