The Dismal Science: A Personal Reflection – Part Three

Part 3: Great Expectations – Discovering the Meaning of Keynes

I came to Keynes by a rather circuitous route. Despite being immersed in the Keynesian-Monetarist debates, I never read Keynes’s General Theory as an undergraduate. The attitude to Keynes seemed similar to that of the pioneering scientists in the natural sciences. You didn’t need to read Newton’s own words to understand the laws of motion which are set out so clearly in modern textbooks; so too with Keynes I was taught. My dis-satisfaction with mainstream economics and the search for alternatives initially led away from Keynes in two main directions – Karl Marx and Herbert Simon. A final-year option on Marxian economics gave me a proper grounding in classical economics from Smith to Marx as well as an introduction to radical literatures that paralleled what I was studying in more mainstream courses on macroeconomics and labour economics. Marxian theories of crisis provided a radical alternative to macroeconomics while Marxian analysis of the labour process gave a radically different conceptualisation to that provided by implicit contract theory, segmented and dual labour markets theories, and New Keynesian imperfectionist theories. The course on Marxian economics also introduced an alternative perspective on the methodology of economics that broadened my horizons beyond Popper and Kuhn.

I was actually introduced to the work of Herbert Simon in my first-year undergraduate course on International Relations. I had to write a paper on the Cuban Missile Crisis and given my growing interest in economics, my tutor suggested that I read Graham Allison’s Essence of Decision. It was this book that persuaded me to specialise in economics since it introduced alternatives to the rational-agent model, particularly Simon and the behavioural theories of the firm of Cyert and March.

By the time I arrived at Cambridge for my graduate studies in the early 1980s, my interest in a more behavioural approach to economics had led me to the problem of understanding decision making under conditions of uncertainty, and that in turn led to the work of George Shackle. It was Shackle’s The Years of High Theory that ultimately opened my eyes to the importance of reading, really reading, The General Theory. So from the outset I approached The General Theory influenced by Shackle and Joan Robinson with a focus on Chapter 12 and what Keynes had to say about long-term expectations. I was very fortunate at Cambridge to be taught macroeconomics by Geoff Harcourt and Bob Rowthorn, a great combination for someone strongly influenced by both radical Keynesian and Marxian critiques of mainstream economics. Both were wonderful role models – radical economists with a thorough knowledge of the history of the subject who combined excellent theoretical skills with a deep understanding of real-world economies, and a strong commitment to improving the lives of others.

The early 1980s was an exciting time to be in Cambridge. Rod O’Donnell was just finishing his PhD on the philosophical foundations of Keynes’s General Theory and attending one of his seminars made me realise the importance of Keynes’s Treatise on Probability. This was reinforced by Gay Meeks who taught the graduate course on Philosophical Issues in Economics. She, more than anyone, was the real starting point for what I call the “New Fundamentalist Keynesian” project of re-reading Keynes’s General Theory from the perspective of A Treatise on Probability. Gay’s paper, ‘Keynes on the rationality of decision procedures under uncertainty: the investment decision’, was first completed in 1976 and circulated around Cambridge for many years but only published in the early 1990s in her edited volume, Thoughtful Economic Man. (It was reconnecting with Gay Meeks and Geoff Harcourt in 2018 that more than anything convinced me to return to economics and that I still had something significant to contribute to the subject.)

The Cambridge-Australian influence on my thinking was strong – Geoff Harcourt and Rod O’Donnell as I have mentioned, but also Peter Kriesler whose work showed me the importance of Kalecki’s contribution. Another Australian I met at Cambridge was Murray Milgate but, unfortunately, I have to admit that his influence on my thinking was more negative. I disagreed profoundly with the Neo-Ricardian project led by John Eatwell and Murray Milgate to create an alternative economics based on Sraffa’s theory of value and Keynes’s principle of effective demand. I attended Eatwell’s undergraduate lectures as well as taking his graduate class. Milgate’s doctoral research on the Neo-Ricardian interpretation of Keynes was published as the book, Capital and Employment, while I was at Cambridge. A detailed critique of the Eatwell-Milgate position became the central focus of my graduate dissertation. I argued that the Neo-Ricardian model, like so much of classical and neoclassical economics, is a static equilibrium model devoid of historical time. In particular Eatwell and Milgate had relegated both short-term and long-term expectations to a mere friction in Keynes’s model whereas I saw the fragility of the state of long-term expectations as central to Keynes’s explanation of involuntary unemployment. In retrospect I realise that I fell into the trap that bedevils economic and political radicalism – devoting too much time and effort on arguing with other radicals on who possesses the “truth” rather than emphasising the commonality of purpose and focusing on countering the arguments of those advocating conservatism.

My Economic Journal 1991 paper in which I drew on hermeneutics to understand the multiple interpretations of Keynes’s General Theory is more reflective of a recognition that the enduring power of The General Theory is its ability to generate multiple interpretations leading to a diversity of research efforts. As a practical economist the concern is the significance of the interpretation as an understanding of real-world economies and as a guide to action. Practical significance is the ultimate criterion of justification for any proposed interpretation of Keynes, not whether or not it represents what Keynes really meant. Authenticity is unattainable in interpretation; at best all we can achieve is an interpretation that is consistent with the text and other related evidence. The General Theory is an “impact theory” that seeks to change not only how we understand the world but, crucially, seeks to change how we intervene to improve the world and the everyday business of life. What really counts in an impact text is the effectiveness of its actionable insights.

Keynes’s General Theory remains powerful and relevant today even although real-world economies have changed massively over the last 90 years or so. There are enduring insights into the behaviour of the economic system, and the limitations of how mainstream economics conceptualises and theorises that behaviour. I read The General Theory initially for its understanding of the macroeconomic consequences of uncertainty, subsequently for its insights into economic methodology and how to conceptualise the capitalist economy, and more recently as an exemplar of a pragmatist impact theory. I claim no privileged position in understanding Keynes but only that Keynes has a privileged position in the formation of my own understanding of how real-world economies behave.

Read Other Related Posts

• The Dismal Science – A Personal Reflection Part 1, 6^th Sept 2023
• The Dismal Science – A Personal Reflection Part 2, 18^th Sept 2023