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Charles McCann, "Probability Foundations of Economic Theory"

Concepts of probability are an integral component of economic theory. However there are a wide range of theories of probability and these are manifested in different approaches to economic theory itself. In this book Charles R. McCann Jr provides a clear and informative survey of the area which serves to standardize terminology and so integrate probability into a discussion of the foundations of economic theory.

Having summarized the three main competing interpretations of probability, he outlines why it is of such a fundamental importance in economics, illustrating this with a comparison of Knight's and Keynes' very different conceptions. He then examines three very different schools of thought: the Austrians, Keynesians and the New Classical/Rational Expectations approach. McMann shows that the Austrian theories and those of Keynes are consistent with subjectivism, individualism and with a view of decision making as a process, entailing a form of necessarianism as a method of analysis. Rational Expectations, in contrast, are based on quantitative measurement and a need to reconstruct economic theory on instrumentalist grounds, requiring a frequentist approach to probability. Probability Foundations of Economic Theory will interest those working in the history of economic thought, economic methodology and the philosophy of economics.

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