Uncertainty in economics and the economy of uncertainty

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Uncertainty in economics and the economy of uncertainty

Journal Title: Фінанси України - Year 2017, Vol 12, Issue 265

Abstract

Uncertainty is a complex and “multilayered” object of multidisciplinary research. However, such concepts as “fundamental uncertainty”, “ambiguity”, “probability” and “risk” are common and universal. For a long time in economic theory, the problem of uncertainty remained, as it were, “behind the scenes”, its presence was rather implied than precisely formulated and served as some kind of “obscure background”, the meaning of which could “appear on the screen” only under certain circumstances, but from which researchers were accustomed to abstracting. The appearance of F. Knight’s book “Risk, Uncertainty and Profit” changed the tradition of abstracting from the uncertainty factor. One of the significant characteristics of neoclassical theory is the neglect of strong types of uncertainty, in particular fundamental uncertainty. The problem of uncertainty is one of the central issues in the Keynesian, post-Keynesian, and institutional areas of economic theory. A deep institutional crisis is the main feature of the current state of the Ukrainian economy and the system of public administration. Now, the conditions of fundamental institutional uncertainty dominate in the national economy. Fundamental institutional uncertainty is the critical level of uncertainty when both permanent “failures” and the chronic institutional “incompetence” of the state, as well as special, different from the classical situation “failures” of market mechanisms of coordination, take place, and the national economic system actually functions as quasi-market. The economic behavior of both the state and business entities in such conditions lose their signs of rationality; economic policy, including fiscal and monetary policies, are mostly unpredictable. The consequences of fundamental institutional uncertainty are the transaction costs of a particular type – “transaction costs of alternative coordination”, which are necessary for the temporary maintenance of the economic system from disintegration.

Authors and Affiliations

Sergіi GASANOV

Keywords

uncertainty risk fundamental institutional uncertainty transaction costs of alternative coordination

EP ID EP530128
DOI -
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