The Philosophy of Keynes' Economics: Probability, Uncertainty and Convention

The Philosophy of Keynes' Economics: Probability, Uncertainty and Convention

The Philosophy of Keynes' Economics: Probability, Uncertainty and Convention

The Philosophy of Keynes' Economics: Probability, Uncertainty and Convention

Synopsis

This collection, featuring chapters from such leading economic thinkers as Sheila Dow, Tony Lawson and John Davis, is a well-written comprehensive analysis of Keynes' philosophy and as such will be welcomed by both the economics and philosophy community.

Excerpt

Keynes's epistemology is formally laid out in A Treatise on Probability and applied with adaptations in The General Theory. These two books do not develop the connection that he saw between judgments of fact and judgments of value, or his growing disillusionment and belief in irrationality. They also omit his economic ideal, which was material prosperity sufficient to release the creative energies of humankind. I have concentrated here on the Treatise and The General Theory, but have mentioned the other ideas where they are relevant.

A Treatise on Probability

Keynes wrote the Treatise to advance what he called the 'logical theory of probability', but there are semantic disputes over the meaning of 'logical', and it is simpler to say that its real achievement was to formalize the rules of practical reason. the Treatise defined the circumstances in which it would be valid to derive probabilities and reach rational or logical decisions. Keynes gave common-sense meanings to the terms 'probability', 'rational' and logical', and he included doubtful arguments within the scope of logic. By 'rational', therefore, he did not mean rational as in an Aristotelian syllogism, or as in rational economic man. By 'rational' he meant, as in the language of everyday life, the systematic use of intelligence to advance a particular end.

Keynes was less interested in pure knowledge than in the knowledge relevant to decision and action. Aristotelian logic and strict microeconomics assume full information, but full information is rare in life. He believed that it was rational to draw conclusions, and act upon them, in the absence of proof or perfect information. 'In the actual exercise of reason we do not wait on certainty, or deem it irrational to depend on a doubtful argument' (CWVIII:3).

The object of the theory of probability was to systematize processes of inference:

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