Uncertainty, technical change and effective demand

In the last two decades, technical change has assumed a central role on the understanding of the economic performance. The emergence of the new Neoclassical growth models and the increasing relevance of the Evolutionary school of thought are two expressions of this change. Reflecting this trend, this dissertation is about technical change. The aim of the study is to incorporate the Evolutionary and Institutional understanding of technical change into the framework of Keynes/Post-Keynesian. We use the concepts of probable knowledge and weight of argument, which come from Keynes's theory of probability, to explain both the decision to introduce an innovation and the development of a technological trajectory in this sense, the evolution of the weight of argument related to the decision to introducing an innovation can explain different degrees of uncertainty that exist in different stages of the development of a technological trajectory'. This discussion drives us to the analysis of the formation of expectations. Accordingly, we claim that the Keynes's taxonomy of short- and long-period expectations is insufficient to deal with continuous technical change. Thus, a new kind of expectation is proposed that is medium-period expectations. The main important feature of the latter is their influence upon the formation of long-period expectations, which will determine a partial endogeneity of the investment decision. Finally, we analyse the impact on the effective demand due to this new taxonomy of expectations. We conclude claiming that the incorporation of medium-period expectations and its relation with long period expectations generates a system with constantly evolving expectations. In this system, a level of employment of equilibrium, regardless the way it is defined, will never be achieved