Millennial Keynes: The Origins, Development and Future of Keynesian Economics by Ventelou Bruno Nowell Gregory P

Author:Ventelou, Bruno,Nowell, Gregory P.
Language: eng
Format: epub
ISBN: 9781317464716
Publisher: Taylor & Francis Ltd

Keynes did not just follow his brilliant mentors; he also started a new line of inquiry engendered by his own research. His thesis of logical probabilities, as mechanisms of knowledge, directly inspired a young Cambridge student, Frank P. Ramsey. Ramsey’s work begins with a highly critical reading of Keynes’s Treatise on Probability. Ramsey was destined to start a third current of probability theory; to the traditional frequentist position and Keynes’s logical probability, he added the subjectivist approach. This position has since been developed by Bruno de Finetti (1937) and Leonard Savage (1954). In this view, probability belongs to a perfectly subjective system of belief.

Ramsey’s view may be connected to an extreme version of Keynes’s. Probability appears, here as well, as a mechanism of knowledge based on formal logic. This time, however, the use of induction of the first order is completely abandoned. Probability is henceforth subjective. It functions more to give meaning to human action than it does to reveal anything about the essential nature of reality.3 Its justification, as a last resort, is turned toward action, so as to give it rational coherence. The use of probability stems therefore from a pragmatic initiative, as Keynes acknowledged in discussing Ramsey’s thesis. For example, agents will use subjective probabilities to calculate the expected utility of their actions. Let us note that Keynes, in his review of the posthumous edition of Ramsey’s article, agreed with this last subjective interpretation of probability. He pays homage to his friend and bows to his reasoning (“Ramsey as a Philosopher,” CW 10:335–346).

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