Keynes' theory of conventional decision-making in financial markets
Bibliographic Data
| ID | 20318529 |
|---|---|
| Authors | Ognjen Radonjić (0009-0005-5465-3319, Filozofski fakultet, Beograd, corresponding author) |
| Year | 2009 |
| Volume | 51 |
| Issue | 4 |
| Pages | 337-364 |
| Publication date | 2009-01-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Sociologija (JOURNAL) |
| Journal identifiers | ISSN: 0038-0318 • E-ISSN: 2406-0712 |
| Publisher | National Library of Serbia (PUBLISHER • RS) |
| DOI | 10.2298/soc0904337r |
| OpenAlex | W2034366716 |
| Language | EN |
| References cited | 3 |
The question addressed in this paper is whether financial markets actually function in the manner described by the today still dominant modern theory of efficient financial markets. We argue that the theory's conclusions are based on unreal assumptions that the future is predictable and ergodic. Since assumptions of a model determine its conclusions, unreal assumptions imply incorrect and inapplicable theoretical models. In contrast to neoclassical theory, Keynes insisted that future was fundamentally uncertain and nonergodic. Under such circumstances, when it is not possible to calculate the future, the only rational thing for agents in financial markets to do is to base their decisions on socially acceptable conventions. Consequently, since convention-based expectations are unstable and since expectations create future it is possible to prove that financial markets are inherently unstable
Convention · Econometrics · Economics · Financial economics · Financial market · Function (biology) · Microeconomics · Positive economics · Rational expectations · Sociology · Economic Analysis and Policy · Economic theories and models · Economic Theory and Policy · Finance
| Citation velocity | historical |
|---|---|
| Highly cited | No |