The Keynesian revolution, uncertainty, and deductive general theory
The view has been maintained, with some justification, that, ever since its emergence in the late seventeenth and the early eighteenth century, orthodox modern economic theorising has been built around, or has mainly consisted of, one central model of maximisation and selfequilibration. It has been claimed regarding modern political economy and economics that though there have been 'unsuccessful rebellions . . . its basic maximising model has never been replaced',1 that is, neither its maximising statics nor its self-adjusting dynamics.
The self-adjusting, self-equilibrating model, or 'system', was generalised and consummated in The Wealth of Nations. But by Adam Smith the model was not carried to extremes of unrealistic abstraction, and was based on historical and psychological evidence and analysis, including a view of man. Ricardo, however, reduced self-adjustment and self-equilibration to one of his extreme abstractions, or 'strong cases', by explicitly and precisely introducing the critical fundamental assumption which is essential for this `model'. For the keystone of the whole orthodox, post-Ricardian structure, in terms of 'explaining' how individuals might come to be acting, or might be able to act, in the way prescribed by the model, was an assumption about knowledge, certainty, and expectations. This keystone has, ever since Ricardo, retained its essential role in the central body of orthodox theorising, and also in some theorising claimed to be anti-, or contra-orthodox. I would like to quote an earlier account of this 'fundamental assumption', which included examples from Bentham to Professor Joan Robinson, and which was written when the Keynesian `revolution' was at its height ( Hutchison, 1937 and 1938):
There is one remarkable characteristic common to nearly all formulations of the 'Fundamental Principle' from its origins in Utilitarian doctrines down to the present time. One of Bentham's formulations was: 'Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do, as well as to determine what we shall do' [ 1859, vol. I, p. 1].