In light of the current worldwide financial crisis, international policymakers and those involved in the European and American financial markets are strongly advocating the re-evaluation of Keynes, his successor Minsky, and the Austrian School, on the basis of their belief that economic trends cannot be analyzed accurately with only current standard economic theories.
The idea of understanding a capitalistic economy as a mechanism that allows immanence of uncertainty and analyzing mainly the formation of expectations and human actions based on subjective probability under such mechanism has been firmly established by the Keynes-Minsky model. In the 1870s, Menger of the University of Vienna developed a similar economic theory. Thereafter, the Austrian School has consistently held onto structural analysis, the frame of analysis that succeeded Menger’s ideas.
Structural analysis considers economic entities as heterogeneous rather than homogeneous. This method of analysis brings heterogeneous economic entities into relief by resolving aggregate values and incorporates such facts clearly so that the manner of forming expectations and the resultant actions differ among entities and, depending on the occasion, even within the same entity over time. This talk examines the usefulness of the idea of the Austrian School’s structural analysis, which was initiated by Menger and continued by Hayek and Schumpeter; this talk also discusses the concepts of uncertainty and subjective belief in a Japanese perspective.
Hirohiko Okumura is Professor of Economics at the Gakushuin University (Tokyo). In the past he worked as an Economist at the Bank of Japan and as a Chief Economist and Executive Fellow at the Nomura Research Institute (Tokyo). In his research he is analyzing the Japanese Bubble Economy by using models which account for uncertainty. One of his major publications on the Japanese Bubble Economy is “Gendai Nihon Keizairon (Japanese Economy during the Period of “Bubble” and “Bubble Burst”), Toyokeizai, 1999. This book was awarded the “The 21st Tanzan Ishibashi Prize” (2000). A Chinese version of this book was published in 2000.