Keynes was not a Keynesian. He was a Post Keynesian!

26 Jun, 2015 at 18:23 | Posted in Economics | 1 Comment

keynes3But these more recent writers like their predecessors were still dealing with a system in which the amount of the factors employed was given and the other relevant facts were known more or less for certain. This does not mean that they were dealing with a system in which change was ruled out, or even one in which the disappointment of expectation was ruled out. But at any given time facts and expectations were assumed to be given in a definite and calculable form; and risks, of which, tho admitted, not much notice was taken, were supposed to be capable of an exact actuarial computation. The calculus of probability, tho mention of it was kept in the background, was supposed to be capable of reducing uncertainty to the same calculable status as that of certainty itself …

Thus the fact that our knowledge of the future is fluctuating, vague and uncertain, renders Wealth a peculiarly unsuitable subject for the methods of the classical economic theory.

John Maynard Keynes QJE 1937

And this emphasis on the importance of uncertainty is not even mentioned in IS-LM Keynesianism …

1 Comment

  1. Lars,

    Do you think Keynes would have felt comfortable with the basic premise of RE, that is, that under “imperfect information”, incongruencies in the perception of relative prices against absolute prices would lead to quantity effects and unforeseen policy outcomes? While Keynes would have no truck with the methodology of RE, I would imagine he would entertain a conversation along the lines above.

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