The Relative/Absolute Nature of Knowledge and Economic Analysis

Abstract

Central to economic analysis are assumptions and hypotheses concerning the extent and nature of the knowledge held by individuals. In this respect it is a noticeable feature of realist' accounts that they tend to focus upon the pervasiveness of uncertainty as an undeniable fact of economic life. (Nonrealist, or instrumentalist accounts, in contrast, tend to assume that agents have perfect information, correct foresight, rational expectations, and so on.) It is also apparent that this realist focus upon uncertainty tends to give rise to a concentration of attention upon those situations in which (possibly numerically measurable) probabilistic knowledge is thought to be available. Clearly such accounts are important. Nevertheless, I wish to suggest that such a restricted choice of focus for the realist is not entirely satisfactory, since, in particular, it tends to lead to a neglect of the widespread observation that feelings of certainty and claims to truth are also pervasive in human society. I want to suggest, moreover, that if we are to account for the latter observation (and economists concerned with realism of analysis surely need to) then various arguments and conclusions have to be taken on board which, in turn, appear to bear consequentially upon the nature and conduct of economic analysis in general. Section I below discusses such possible limitations of existing realist accounts of agent knowledge in some detail. The suggested route for responding to, and resolving, apparent problems which involves the argument that aspects of knowledge can have a relative as well as an absolute character is described in sections II and III; and the various analytical consequences of the account there set out are discussed in section IV. Section V contains concluding comments and touches upon ways in which the proposed account might be appraised and rnade operational.