Keynes on Knowledge, Expectations, and Rationality

Citation

Dow S (2012) Keynes on Knowledge, Expectations, and Rationality. In: Frydman R & Phelps E (eds.) Rethinking Expectations: The Way Forward for Macroeconomics. Princeton, USA: Princeton University Press, pp. 112-129. http://press.princeton.edu/TOCs/c10002.html

Abstract
The purpose of this paper is to revisit Keynes's ideas on knowledge, expectations and rationality in the light of interpretations and developments over the last few decades. Keynes's philosophy focused on establishing grounds for belief under the general conditions of uncertainty. He argued that calculative individualistic rationality (in the standard mainstream economics sense) had limited scope. He developed these ideas within his macroeconomics in terms of a theory of expectations and confidence in expectations, emphasizing the role of social conventions as a basis for judgment. Keynes saw sociality interplaying with individuality also in terms of ethics, and the idea of public institutions as a vehicle for promoting social good. Keynes's ideas on knowledge suggest a pluralist methodology for economics, employing a range of models and sources of evidence, based on a notion of rationality as 'reasonableness'.

People

Professor Sheila Dow

Emeritus Professor, Economics