Abstract
This chapter aims to serve as a plain introduction and brief summary of my new book entitled J.M. Keynes versus Frank H. Knight: Risk, Uncertainty and Decision. Speaking of myself, I have been a professional economist more than 50 years. For those long years, so many things and events, mostly beyond my expectations, have happened in both Japan and foreign countries. Although I was fortunately awarded a Ph.D. from Rochester, I was quite annoyed by the practical irrelevance of general equilibrium theory, a very elegant field of economic science, which I myself taught to my students at Pittsburgh in the 1970s. When Oscar Morgenstern visited Pittsburgh, he kindly advised me to turn my interest to the economics of risk and uncertainty, a newly rising subject promoted by my contemporaries. It was a rather surprising fact that while J.M. Keynes and F.H. Knight did classical contributions to risk and uncertainty theories in the same year of 1921, their relations to more modern theories including George Akerlof, Joseph Stiglitz, and Richard Thaler had not been fully elucidated. Clarifying the total picture of such connections is an important motivation of writing this paper.
According to J.K. Galbraith, we lived through the First Age of Uncertainty in the twentieth century. Around 1990, we witnessed the Fall of the Berlin Fall together with the Collapse of the Soviet Union. Since we experienced the Great Recession caused by the 2008 Lehman Shock, we entered the Second Age of Uncertainty in which the old masters such as Keynes and Knight had superbly returned with new costumes on the academic stage. Surely, we can learn new lessons from old teachings.
This chapter also gives the compact outline of this book. The book as a whole consists of two parts. The first part contains the first four chapters, being concerned with history and micro. The second part contains the following four chapters, dealing with market and application.
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Notes
- 1.
Galbraith (1977) was one of the most popular books in economics written in the 1970s, being also the subject of a television series which broadcasted not only in the USA and the UK but also in many other countries. The title “The Age of Uncertainty” per se was a very catchy word; thus helping to someway clear up people’s uneasiness about the political economy caused by the great Watergate Scandal at Washington, D.C. People wanted to find a ray of hope in the dark and uncertain world.
- 2.
Shizuo Kakutani was a very famous mathematician who was born in Japan and later immigrated to the USA. He once served as a research assistant to von Neumann and Oscar Morgenstern when they were jointly writing the great book The Theory of Games and Economic Behavior. Kakutani’s fixed point theorem is so powerful that it can be applied to many economics fields including game theory, general equilibrium theory, and oligopoly theory. In 1969, I myself met Professor Kakutani at the University of Rochester, who made a very exciting seminar, inspiring so many participants. This was surely one of my fond memories in my graduate student days in the USA. Hirota (2004) vividly describes the life and work of Kakutani.
- 3.
Samuelson honestly acknowledges that Fig. 1.1 per se is not exactly depicted: the range of estimates shown there can no claim to accuracy, but they may roughly portray the nature of the strong challenge of the U.S.S.R. against the USA. Although Samuelson compared the two economies in terms of GNP (Gross National Product), I employed a more modern term GDP (Gross Domestic Product). The deference between GNP and GDP is statistically so small that it can safely be interchangeable in rough comparison of the two economies.
- 4.
In an important book, Tsuru (1961) posed the question whether or not capitalism had changed since the 1960s. He thought that the distinction between capitalism and socialism as a social system was still effective and reserved a further investigation.
- 5.
After witnessing the crisis of 2008, Paul Krugman (2008) has remarked that “John Maynard Keynes, the economist who made sense of the Great Depression, is now more relevant than ever” (Krugman 2008, p.190). Michio Morishima, perhaps the greatest economist who Japan has ever produced, has published an important book with the sensational title “Why will Japan Collapse?” Morishima (1999) has advocated the necessity of establishing a sort of interdisciplinary and comprehensive research in social science—what he once called a “symphonic social science”—a true synthesis of economic science, sociology, education science, history, and the like. I myself believe that the synthesis must include natural science such as biology, physics, and life science as well.
References
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Sakai, Y. (2019). How My Life and Work Have Been Influenced by J.M. Keynes and F.H. Knight: Introduction and Summary. In: J.M. Keynes Versus F.H. Knight. Evolutionary Economics and Social Complexity Science, vol 18. Springer, Singapore. https://doi.org/10.1007/978-981-13-8000-6_1
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