Rationality and expectations; Keynes’ analysis
Issues in economics: can uncertainty be allowed for fully by means of probability calculations? What sort of account can be given of investment behaviour under conditions of irreducible uncertainty about the future; and what, if anything, constitutes rational economic action in such circumstances?
Philosophy employed: work on the problems of induction (Hume, Popper, Warnock, Goodman, Strawson) and on rational action.
Argument
i. absence of deductive guarantees about future events
ii. fact that we ‘have to’ reason, act, decide
iii. custom as the ‘great guide’ of life
Upshot: If Keynes is right about the limited scope for forecasting events with numerical probabilities, then it can be argued that it is rational (in a common sense of that term) to take custom as the ‘guide’ of economic life. (Or is a slightly weaker upshot all that’s warranted – that this isn’t irrational?) (Compare Greenspan on the ‘irrational exuberance’ involved in the stock market bubbles)
Note: a longer version of much of today’s argument can be found in Meeks, ‘Keynes on the rationality of decision procedures under uncertainty’ in Thoughtful Economic Man (ed. Meeks, JGM), Cambridge University Press.
(Dr. J G T Meeks)