Question

Keynes wrote in The General Theory: “If we speak frankly, we have to admit that our basis of knowledge for estimating the yield ten years hence of a railway, a copper mine, a textile factory … amounts to little and sometimes to nothing”. Keynes was not talking about periods of economic turmoil or crisis like that we are experiencing now, when confusion about what happens next is obvious to all. In Keynes’ view, a state of “near ignorance” was the normal state of affairs.

Please discuss Keynes’ concept of “uncertain” knowledge and what it may imply for our ability to (a) measure risk in portfolios of financial assets and to (b) make “rational” investment decisions.

Answer 1

Keynes idea of uncertain knowledge or information states that there is a contrast between riskalso, uncertainty. Risk or danger s when there can be some type of protection,though uncertainty can't be guaranteed against. Business people are uncertain or questionable about the future reaction to their items, which is the reason benefit is their prize. Uncertain information / knowledge offers ascend to cash, liquidity and account being a focal perspective in the economy. Dubious information gives rise to individuals not commiting their full speculation which is the reason there is little level of joblessness. On account of risk estimation, all conceivable future functions are realized which is the inverse of uncertainty where future functions are obscure. In this manner risk/danger can be estimated through Risk the board, cost/advantage examination, spending arranging and so forth Speculations will be imperfect in money related resources and genuine organizations, Which is the reason they won't focus on irreversible speculations and select more fluid resources, for example, holding

cash over illiquid resources.