We present three arguments regarding the limits to rationality, prediction and control in economics, based on Morgenstern’s analysis of the Holmes–Moriarty problem. The first uses a standard metamathematical theorem on computability to indicate logical limits to forecasting the future. The second provides possible nonconvergence for Bayesian forecasting in infinite–dimensional space. The third shows the impossibility of a computer perfectly forecasting an economy with agents knowing its forecasting program. Thus, economic order is partly the product of something other than calculative rationality. The joint presentation of these existing results should introduce the reader to implications of these concepts for certain shared concerns of Keynes and Hayek. Blackwell Publishers Ltd 2002.
ASJC Scopus subject areas
- Economics and Econometrics