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Dear colleagues,
We should remind ourselves that neoclassical economics does not
always require the assumption of perfect knowledge. Although the
neoclassical theory of, for example, perfect competition reproduced
in textbooks does require perfect knowledge (of the relevant
variables), neoclassical economics has for quite some time now
assumed in many other contexts probabilistic knowledge and, as
someone said on this list a couple of days ago, asymmetric
information (to a lesser extent, as some neoclassicals stick to the
representative agent). Even a notion of uncertainty (sometimes
called Knightian uncertainty, sometimes called ambiguity) that
goes beyond Knightian risk or uncertainty in standard Subjective
Expected Utility theory is beginning to make its way into the
mainstream.
In reply to Michael Perelman, I'd say that formalization does not
require perfect knowledge either, at least as I understand these
terms, which is not necessarily the same way Michael does. On
the other hand, it is true that some specific varieties of
formalization, particularly some axiomatic approaches to behavior
in neoclassical economics, impose quite restrictive assumptions
regarding knowledge - but not perfect knowledge.
Of course, all this depends on what one means by perfect
knowledge. In the sense I use the expression, perfect knowledge is
distinct from probabilistic knowledge and from uncertain knowledge
of probabilities (the latter is characteristic of what some people
have called termed Knightian uncertainty, ambiguity or just
uncertainty). These other types of knowledge have been suitable to
an axiomatic approach.
Cheers,
David Dequech
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