Disequilibrium states and adjustment processes: towards a historical-time analysis of behaviour under uncertainty

Mainstream theories of decision making conceptualise uncertainty in terms o f a well-defined probability distribution or weighting function. Following Knight, radical Keynesians consider subjective expected utility (SEU) theor y and its variants as a restricted theory of decisionmaking applicable to s ituations of risk and, hence, of limited relevance to the understanding of crucial economic decisions under conditions of fundamental uncertainty in w hich probabilities are ill-defined, possibly non-existent. The objective of this paper is to outline a radical Keynesian theory of dec ision-making under uncertainty, arguing that Keynes's suggestion to a two-d imensional probability-credence framework provides the basis for determinin g the limitations of mainstream approaches and points the way forward to th e construction of a more general encompassing theory relevant to psychologi sts and economists outside of the Keynesian tradition.