Radical Ignorance in Individual Decision Making: Assessing Austrian Subjectivism
University of Siena Dept. of Economics Working Paper No. 289
26 Pages Posted: 27 Nov 2000
Date Written: May 2000
In recent years most Austrian developments have argued for a definitive shift away from the search for equilibrium constructs and in favor of the analysis of those institutions which favor ordered outcomes of the market process. These developments imply an inevitable withdrawal from methodological individualism and are based on the contention that a probabilistic approach to subjective decision making is flawed. Our aim in this paper is to point out that a withdrawal from equilibrium theorizing is not justified by the inability of pure economic theory to deal with radical ignorance. We argue that the kind of formal representation of decision making under uncertainty one finds in recent developments in microeconomic theory, namely the non-additive approach to subjectively probable assessments, recognizes as a starting point for research the view that ignorance is an inherent feature of every decision regarding future events. In this, it resembles the Shackleian assertion that the future is the unpredictable consequence of creative choices made by individual agents. A critical, but positive, attitude towards recent attempts to formalize radical ignorance suggests that the Austrian tradition may actually influence future research rather than merely constitute an optional supplement to it.
JEL Classification: B21, D81
Suggested Citation: Suggested Citation