Uncertainty and Expectations in Shackle's Theory of Capital and Interest

This paper is focused on the macroeconomic aspects of Shackle’s theory of decisions under uncertainty and, more particularly, of his theory of capital and interest. The paper starts by arguing that Shackle’s general approach stems from the identification of, and conflict between, two Paradigms: the Economics of Uncertainty and Expectations (EUE), which was developed in the “years of high theory”, and General Equilibrium Theory (GET). The paper brings out some flaws in Shackle’s view of this conflict and highlights the insights and advances by which Shackle identifies and strengthens the major features of the EUE Paradigm. Amongst these features is the focus on historical time, on expectations and their failures, on money as a store of value, on ex ante and ex post magnitudes, on macroeconomic equilibrium and disequilibrium, on economic fluctuations. The paper argues that, while clarifying or criticizing in his brilliant manner many or some parts of the Keynesian theory of interest or of the Austrian theory of capital, Shackle fails to highlight the difference between the theory of interest as such (the old Austrian theory) and the theory of the money rate of interest (the Keynesian theory) as well as the difference between the theory of capital in the context of logical time (the old Austrian approach) and the theory of capital in the context of historical time (Hayek’s and Shackle’s own approach)