be divorced from politics, psychology, sociology, or in the final analysis meterology and even more remote fields of enquiry, if it is to be “applied.”  The economist and econometrician need feel less shame because of the failure of their forecasts than for any confident pretensions to be able to prescribe or forecast at all: and to be fair, it is only the more brash who have displayed any such confidence.  Book I “Economic Theory and the Scheme of Things Entire” elaborates on these points.

Pursuing the central theme that economic decisions are by their nature largely irrational, Book II examines the achievements and limitations of the Theory of Value which is based on the simplifying assumption of rational decision-making.  Shackle argues that a satisfactory theory would have to make allowances for the important effects of “surprise” on decisions and prospective profits and hence on values.

Book III discusses Keynes’s attempts to enlarge theory so as to allow for the effects on expectations of surprising changes in the news.  Windfall profits are the prime movers of prices in the Treatise on Money, and fitful shifts in the state of the news are the main determinants of the schedules both of the marginal efficiency of capital and of the liquidity preference for money in the General Theory.  But “the Profession,” by playing down the importance of these manifestations of unreason in Keynes’s theories have been able to make them appear as mere generalisations of more orthodox theories.  In Professor Shackle’s view, even Keynes himself never realised the full implication of what he had written, which was no less than that the main determinants of the economic future, and in particular of the effects of what we decide today, mainly consist, beyond a very close horizon, of largely irrational behaviour and other “surprises” about which we can hope as yet to know practically nothing.

Book IV returns to the criticism of theories based on knowledge and rational choice and deals in particular with simplifying assumptions such as the stationary state which remove the complications due to the passage of time.

Finally in Book VI the author comes to grips with those theories which claim specifically to deal with risk and uncertainty in an economic context.  Having introduced the reader to the various different concepts of probability to be found in the literature, he points out that a good deal of knowledge is still needed if one is to be able to apply these concepts usefully in any

economic situation.  For example, one needs to know what are the possible effects of different decisions (in so far as they may be relevant to one’s own interests in the future) as a prelude to being able to form some idea of their relative probabilities.  To put the same point differently one needs to know a complete list of the possible “states of the world “ which may be relevant to the effects of the decisions between which one is choosing, as well as to form some judgment of their probabilities.  Professor Shackle again emphasises that some of the most important items in the news come as bolts from the blue.  For this reason the “Theory of Games” is largely irrelevant to economic decision making: for by assuming known the “rules of the game” and the probabilities of the results of various pairs of strategies it eliminates every element of that surprise which is of paramount importance in economics as in war.