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READING KEYNES’S POLICY PAPERS THROUGH THE PRISM OF HIS TREATISE ON PROBABILITY: INFORMATION, EXPECTATIONS, AND REVISION OF PROBABILITIES IN ECONOMIC POLICY

Published online by Cambridge University Press:  24 November 2021

Sylvie Rivot
Sylvie Rivot*
Affiliation:
Sylvie Rivot: Université de Haute Alsace, Mulhouse and Colmar, and BETA, Université de Strasbourg.
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Abstract

When scholars investigate the legacy of John Maynard Keynes’s Treatise on Probability (1921) for the development of Keynes’s thinking, the attention usually focuses on the connections among Keynes’s probability theory, his conception of decision-making under uncertainty, and the theory of the functioning of the macroeconomic system that derives from it—through the marginal efficiency of capital, the preference for liquidity, and the self-referential functioning of financial markets. By contrast, this paper aims to investigate the connections between Keynes’s probability theory, on the one hand, and his economic policy recommendations, on the other. It concentrates on the policy recommendations defended by Keynes during the Great Depression but also after the General Theory. Keynes’s economic policy can be understood as a framework for decision-making in situations of uncertainty: fiscal policy aims to induce private agents to change their “rational” probability statements, while monetary policy aims to allow more weight to these statements.

Type
Symposium: Celebrating the Centenary of Keynes’s Treatise on Probability
Information
Journal of the History of Economic Thought , Volume 43 , Issue 4 , December 2021 , pp. 604 - 618
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the History of Economics Society

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Footnotes

I am very indebted to Brad W. Bateman, who kindly invited me to contribute to this symposium. I benefited from Brad’s advice, and also from Pedro Duarte’s and an anonymous referee’s critiques, to whom I am also indebted. All errors and omissions are mine.

References

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