A new issue of Critical Review is out

Here. I provided some thoughts to Jeff Friedman on the third article in this issue. [UPDATE: Evan was a little confused when reading this, and I want to clarify - I was NOT an anonymous reviewer for the paper. I was asked to look at it, and I am mentioned by name in the acknowledgements. No worry on propriety here, I don't think]. Many of my thoughts were (1.) trying to get Friedman not to downplay Keynes (1921) in favor of Knight (1921) on uncertainty, and (2.) trying to get him not to be so hard on neoclassicism and risk/uncertainty.

This was an interesting portion of a footnote on the Keynes/Knight thing:

"Stiglitz, whose work is so often thought to represent a bracing challenge to the unrealistic assumptions of mainstream neoclassical economics, actually goes out of his way to downplay the importance of the Keynes-Knight point, at least in the case of the financial crisis. In a review essay on Robert Skidelsky's Keynes: The Return of the Master, Stiglitz (2010b, 7) takes Skidelsky to task for emphasizing Keynes's sharp distinction between "situations in which we have good statistical data so that we can talk meaningfully about the probability that a particular event will happen," and uncertainty, i.e., ignorance (which Stiglitz does not even try to define). "much of the behavior that lead to the crisis," Stiglitz asserts, "did not depend on this distinction. More important, for instance, were the incentives, which encouraged banks to take on too much risk."

Without being any kind of expert on the financial crisis, I think Stiglitz has a point here. The impact of uncertainty ("radical uncertainty" if you prefer - as some people do) seems to me to be more apparent after the crash. Incentives and plain ol' risk set us up for the crash, while uncertainty is keeping us in a period of high liquidity preference and stagnation.