The Economic Problem of Happiness: Keynes on Happiness and Economics

By stressing the substantial continuity of vision between John Maynard Keynes’s early unpublished essays and his more mature writings, the paper discusses Keynes’s ethics and focuses on his thoughts about happiness. In particular, we emphasize the anti-utilitarianism of Keynes’s vision and his belief that material wealth is but a precondition to enjoy the possibilities of a good life, and direct attention to problems of incommensurability raised by the multidimensional nature of happiness as considered by Keynes. We then argue that the rediscovery of Keynes’s legacy in this respect may be a precious counterweight to the most controversial aspects of today’s happiness research.     

Vicarelli,Keynes, and the unstable nexus between investment,liquidity, and finance

The goal of this article is to reconstruct Keynes’s vision of the unstable nexus between investment, liquidity and finance, as set out by the Italian economist Fausto Vicarelli (1936–1986). As argued in the article, one of Vicarelli’s main contributions consists of explaining the inherent instability of financially sophisticated capitalist economies in terms of the interaction (and double dissociation) between investment, saving, and stock-holding decisions, within a Keynesian framework characterized by the presence of fundamental uncertainty. While Vicarelli’s interpretation of Keynes is best understood in the context of the post-Keynesian literature, its relevance goes beyond that, as its sheds light on current issues related to the post-2008 financial crisis and its policy implications.     

Keynes and Sraffa's 'Difficulties with J. H. Hollander'

The paper reports on Jacob H. Hollander's cooperation with John Maynard Keynes and Piero Sraffa in the preparation of the latter's edition of The Works and Correspondence of David Ricardo. The report is based on archive material from various sources, including the unpublished papers of Edwin Cannan, Piero Sraffa, Jacob H. Hollander, John Maynard Keynes, and Jacob Viner, and the archive of the Royal Economic Society. The archive material consulted by us shows that, put mildly, Jacob H. Hollander did not promote Sraffa's editorial project: he held back material which he had received from Frank Ricardo and did not disclose to Sraffa that he owned several important letters which he had privately purchased. Moreover, Sraffa was refused access to Ricardiana even after he had traced them down in laborious detective work to be in Hollander's possession. Hollander's unwillingness to cooperate with Sraffa considerably delayed the publication of the Ricardo edition.     

Hans Singer's debts to Schumpeter and Keynes

This essay discusses Hans Singer's intellectual formation andthe influences on his early writings and on his post-1947 developmenteconomics. It asks what impact the unusual experience of studyingwith both Schumpeter and Keynes had upon his subsequent economicthinking and practice. It argues that the influence of boththese mentors was surprisingly small, compared with that ofSpiethoff and Clark. Singer repaid his debts to Schumpeter andKeynes, but by working in the new currency of development economics,some of which was his own coinage. His motivation for this vasteffort was derived from the social egalitarianism of figuressuch as William Beveridge, Archbishop Temple and R. H. Tawney,rather than the liberalism of Schumpeter and Keynes.     

Keynes and probability: An assessment

Abstract

Most interpreters agree that Keynes had a wide-ranging, complex, ‘vision of the world’, which underlies his theoretical contributions. Whenever this is forgotten, as happens in the so-called neoclassical synthesis, not only the original Keynesian spirit goes lost but also, and especially, we lose substantive bricks for our theoretical constructions. The paper considers an important instance of this general rule; namely Keynes's views on the logic of probability, meant as the field concerning human behaviour in an uncertain world (hence connected to, but distinct from, the pure theory of probability, meant as a field of mathematics). The paper begins by recalling the main aspects of the classical and frequentist approaches to probability and the main criticisms they received, pertaining among other things to the limits of their applicability. We then consider Keynes's own views, stressing three aspects: the definition of probability as pertaining to the field of logic, the notion of uncertainty and of the ‘weight of the argument’, the ‘theory of groups’. We then discuss the subjective approach of de Finetti, Ramsey and Savage, and contrast it with Keynes's own views. Finally, we consider the implications of our analysis for the interpretation of Keynes's General Theory, and of his attitude towards econometrics.     

A historiographical exhumation of J.A. Hobson's Over-Saving Thesis: General theory versus historiography

Abstract

The discussion of J.A. Hobson's understanding of over-saving has been largely confined within John Maynard Keynes' famous critique in the General Theory. I argue that gauging Hobson's contribution by ‘general theory’, that is, by an ahistorical, non-evolutionary yardstick, is to miss the larger part of Hobson's achievement. Hobson's conception of over-saving was contained within an evolving historiography of capital accumulation and took on various meanings depending on whether Hobson was discussing a competitive or monopolistic environment. I show that Keynes' ‘corrected’ version of over-saving was implicitly contained within Hobson's analysis of an evolving monopolistic industrial structure.     

Keynes,Ricardo and the classical theory of interest

Keynes made harsh and repeated attacks on the work of Ricardo, blaming him particulary for what Keynes called the ‘classical theory’ of interest. Garegnani and others argue that Keynes' criticisms of the classical theory of interest apply to later neoclassical writers, but not to Ricardo. This paper re-examines Keynes' criticisms. It argues that Keynes attacked Ricardoapos;s theory of interest despite his awareness that Ricardo did not hold the ‘classical theory’. Moreover, Keynes not only expressed sympathy for Ricardo's understanding of interest, but his criticisms which do apply to Ricardo do not address Ricardo's theory of interest.     

School Expenditures and Educational Discrimination under the Fourteenth Amendment

This paper examines the decline in use of the Knight-Keynes uncertainty concept in mainstream economics. Using electronic archives, it shows that the frequency of its appearance in leading journals of economics has fallen rapidly from the 1950s. As well as to the declining popularity of Keynesian ideas since about 1970, the decrease in this use of the uncertainty concept is additionally related to the increasing mathematical formalization of economics and to the prevalence of a positivist emphasis on prediction. Some possible causes of this formalization are examined. Finally the essay discusses the prospects for a broadening of economics within universities, beyond a relatively narrow preoccupation with predictive formalism and including a reinvigorated Keynesianism.     

Augusto Graziani and the Marx-Schumpeter-Keynes ‘Cycle of Money Capital’: A Personal Look at the Early Italian Circuitism from an Insider

ABSTRACT

The paper goes back to the origins of the theory of the monetary circuit in its Italian incarnation. Focus is on the evolution of Augusto Graziani's thinking between mid-1970s and mid-1980s, considering: (i) how Graziani connected (positively or polemically) with Keynesianism and Post-Keynesianism, both in its Cambridge and US incarnations; (ii) how Graziani interpreted the contributions of Keynes proposing a continuity between the Treatise on Money, the General Theory, and the articles on finance published after the 1936 book; (iii) how beneath the research programme of Italian circuitism (Graziani) we may recognise a peculiar Marxian inspiration, later on pursued for a while by some participants to the Seminar in Monetary Theory that Graziani coordinated in Naples (1981–85). Since the mid-1970s Graziani — who already had a profound knowledge of Neoclassical Theory; and who was deeply aware of the role of institutions — developed more and more his heretical stance into what we may label as a ‘structural Keynesian' approach, inserting Keynes’ views about finance to production and effective demand into a Schumpeterian vision of the capitalist process, and leading to Marxian conclusions about value and distribution. The early forays into circuitism by Graziani were not only critical towards the Neoclassical Synthesis, Monetarism, or New Classical Macroeconomics. They were also grounded in an intense confrontation with other contemporary heterodox currents. The outcome was the construction of an original scheme of thought which amounted to nothing less than a macro-monetary theory of capitalist production.     

Keynes’s view of deficits and functional finance: a Modern Monetary Theory perspective

Abstract

The immediate aftermath of the global financial crisis (GFC) was characterised by a resurgence of interest in the work of Keynes. Fiscal policy became at least temporarily acceptable again, in turn leading to government deficits and debt, as a proportion of GDP, reaching levels not seen since before the onset of the neoliberal period. Keynes’s own pronouncements on deficit financing generated renewed interest. Despite the strength of the neoclassical counterattack – which has been relatively successful in reassessing the crisis as a government failure – confidence in orthodox economics has not been fully restored, at least outside the confines of academia. Although the hopes of heterodox economists – that the GFC might mark the beginning of the end of the neoclassical hegemony – have not been realised, the upswing in interest in Keynes’s views has not entirely died away. This paper considers Keynes’s views of deficits and debt and then looks at the controversial area of Keynes’s position vis-à-vis functional finance. The paper concludes by considering how Modern Monetary Theory might increase our understanding of the nature of deficits and debt and thus provide valuable insights which might underpin the use of fiscal policy to pursue public purpose.     

Keynes and a post-Keynesian controversy over the effect of debt on income expansion

The paper considers arguments of Robertson (1938) and Asimakopulos (1983) that the Keynesian multiplier expansion of output may be constrained by debt implicitly incurred in the financing of autonomous investment necessary to start the multiplier process. The task of this essay is to show that within the ‘short-period’ and static analytical framework of Keynes, this line of reasoning regarding the adverse effects of debt on multiplier-induced expansions of output is unwarranted. Nevertheless it is concluded that if the Keynesian framework is abandoned in favour of a dynamic framework in the manner of a steady trend rate of growth - a choice dependent on how one conceives of the economy, as inherently static or dynamic - then such arguments have troubling implications. In particular, the dependence of Keynes's approach on credit and hence debt forges links between ‘short-periods' whose distinctness from one another is crucial to Keynes's result.     

Foreign investment, reparations and the proposal for an international bank: notes on the lectures of J M Keynes in Geneva, July 1929

Keynes's lectures to the Geneva School of International Studiesprovide substance to the intellectual linkages between the Cambridgedon and economists working in international economic agenciesduring the inter-war period. Keynes was keenly sought afteras a policy adviser; as the notes to these lectures indicate,he provided his audience with theoretical insights into thepressing issues of the day - reparations and the transfer problem,the economic foundations of the Dawes and Young Plans, and proposalsfor an international bank.     

Keynes,the socialisation of trade,and international monetary institutions

While Keynes began formulating his ideas concerning the post-WWII international financial system in the early 1940s, the genesis of these ideas can be traced to his earlier work. The Keynes Plan represents the culmination of his search for adequate institutions that guide economic activity for the public good. The reasons given by Keynes for the establishment of an International Clearing Bank are relevant in the modern international economy, given the current imbalances in international trade. As Keynes argued for the socialisation of investment as a method to achieve full-employment in the domestic economy, he argued for the “socialisation of trade” as a method to achieve international economic balance among nations.     

The econometric challenge to Keynes: arguments and contradictions in the early debates about a late issue *

The paper investigates the discussions between Keynesians and ‘reconcilers’ about the interpretation of the ‘General Theory’, and the effect of the transformation of economics during the thirties as the outcome of that discussion. It highlights the contribution of some of the first econometriians, who argued for a new view of economics as an exact science based on mechanical models and mathematically defined theories, while supporting planning rather than the indirect steering devices suggested by Keynes.

The inroduction of this type of mathematical models in the framework of Keynesian macro–policies is related to two major events: the Oxford meeting of the Econometric Society in which the IS-LM model emerged, and the Cambridge meeting dedicated to the discussion of Tinbergen's work on business cycles.

The framework, antecedents and consequences of Keynes-Tinbergen debate on the role of econometrics is here assessed on the basis of unpublished documental evidence. Although most of the econometricians took sides with tinbergen against Keynes's scepticism on the use of formal models and simple representations in macroeconomics, several of them, including the more influential of the then young mathematically inclined economists, shared some of the basic elements of the critique. These discussions among Frisch, Tinbergen, Lange, Divisia, Roos, Marschak and others are reviewed in the paper and related to the evolution of the Cambridge group itself.     

The Concept of Trust and the Political Economy of John Maynard Keynes,Illustrated Using Central Bank Forward Guidance and the Democratic Dilemma in Europe

Trust is an issue to which Keynesians and post-Keynesians have paid relatively little attention. However, properly understood it is an aspect of almost all activity, including key elements of socio-economic reality. Without trust, market exchange is at the very least problematic, if not impossible. Moreover, trust is intrinsic to a variety of issues with which Keynes, and subsequent Keynesianism have been concerned. In this paper we provide a general social theory conceptualisation of trust and then set out some of the areas where this concept resonates with the work of Keynes in terms of the role of conventions. Conventions quintessentially involve trust and that trust can be unstable, can be withdrawn and can require rebuilding. We illustrate this with reference to central bank policy and the Bank of England's introduction of Forward Guidance. Exploring the problem of trust in the context of banking also highlights a challenge for the continued relevance of Keynes' work. We now live in a neoliberal world and this provides a quite different context for state intervention than was previously the case. Keynes' work is now an argument for the alternative, and as such it requires more than a technical economic argument, it must also address the problem of trust in state policy-makers. We briefly illustrate the challenge this poses with reference to Europe.     

Cumulative prospect theory and the St. Petersburg paradox

Summary. We find that in cumulative prospect theory (CPT) with a concave value function in gains, a lottery with finite expected value may have infinite subjective value. This problem does not occur in expected utility theory. The paradox occurs in particular in the setting and the parameter regime studied by Tversky and Kahneman [15] and in subsequent works. We characterize situations in CPT where the problem can be resolved. In particular, we define a class of admissible probability distributions and admissible parameter regimes for the weighting- and value functions for which finiteness of the subjective value can be proved. Alternatively, we suggest a new weighting function for CPT which guarantees finite subjective value for all lotteries with finite expected value, independent of the choice of the value function. Some of these results have already been found independently by Blavatskyy [4] in the context of discrete lotteries.Received: 14 October 2004, Revised: 6 May 2005, JEL Classification Numbers: C91, D81.We thank Pavlo Blavatskyy and Thorsten Hens for their helpful remarks regarding our paper. Moreover, we thank the referee for his constructive suggestions. This research was supported by the University Research Priority Program “Finance and Financial Markets” a research instrument of the University of Zürich.     

The social construction of value: value theories and John Locke's framework of qualities

Value theory is central to economics. Whenever new economic theories appear on stage, their theory of value is different. I classify value theories along Locke's lines of primary and secondary qualities. When value is thought to inhere in objects, value is a primary quality. The marginalists perceive value as given to objects by autonomous individuals independent of their environment (much like monads) with given preferences. Value here is a secondary quality. Both are unsatisfactory; value is a social construct. The question arises why social value theory, which Clark and Anderson worked on around the turn of the nineteenth century, did not take root.     

Agency theory: choice-based foundations of the parametrized distribution formulation

This paper develops choice-theoretic foundations of the principal’s and the agent’s behaviors underlying the parametrized distribution formulation of agency theory. Both the principal and the agent are expected-utility maximizers and their action-dependent subjective probabilities are defined directly on the outcomes. The results are used to evaluate and interpret the common prior assumption. I am grateful to Simon Grant and, in particular, to Peter Wakker for their comments and suggestions, and to the NSF for financial support under grant SES-0314249.