Structure diagram of Keynes argument
(Dr.
J G T Meeks)

Dictionary
- it is
impossible for us to deduce from our data what the future course of events
will be; for instance, we cannot acquire (certain) knowledge, ex ante, of the future stream of
returns from an investment.
- It is impossible for us to establish quantitative probability
for every possible future state of the world; in particular, we cannot
measure the probabilities of the various possible future returns from a
capital-asset.
- Since actions have consequence in the future, we can deduce
from our data neither which actions are best (give our goals) nor, in
general, even which promise to be best; for example, if we are seeking to
maximise profit, we face the difficulty that we cannot prove
mathematically just from known facts or likelihoods which investment
projects to favour.
- We have to act and to choose between possible courses of
action; similarly, investing is imperative for society and decisions where
to invest have to be made.
- In general, we must select a course of action by some means
other than pure deduction from our data; for instance, we have to decide
which investments to favour, by some means other than just determining
mathematically from our data what the profitability of various projects is or promises to be.
- In practice our method of choosing actions is routine, in the
sense that in the last analysis we rely on a set of habits and conventions
(following the crowd) and especially on the custom of assuming that the
future will be like the past; for example, the entrepreneur of an unquoted
company assumes for practical purposes that the yield he expects from an
investment project on the basis of the present state of affairs will in
fact accrue, whilst those investing in the financial sense, on the stock
market, assume in practice that the market’s existing valuations give a
correct guide to future prospects.
- Since the basis for decision is of this merely conventional
kind, subjective factors – including temperament, fashion, and maybe even
panic and hysteria – can readily exert an influence, and in markets
speculation is likely to arise; thus, the extent to which the entrepreneur
of an unquoted company will invest may depend partly on his mood, and the
stock market is subject to waves of optimism and pessimism.
- But even so, our method of judging how to act isn’t
unreasonable, give the circumstances of unavoidable uncertainty; in
particular, in these circumstances and so long as the bulk of investment
activity remains dependent on private initiative, the way in which that
activity is pursued is as good as could reasonably be expected.