Abstract

Keynes's early philosophical views, especially about probability and social liberalism, provide a background which helps to explain otherwise-puzzling aspects of his economic thinking. ;In his Treatise on Probability he holds that probability is the logical degree to which it would be rational to believe a hypothesis on the basis of specified evidence. He says that only in some cases do probabilities possess definite numerical values . ;In business life, the entrepreneur or investor who seeks to be rational must guide his actions by estimates about factors such as future prices, costs, and interest rates; yet the evidence available seldom determines precise values for the probabilities of such hypotheses. Psychological uncertainty about the future is made more intractable by this essential indefiniteness of most probability judgments. This point is central to Keynes's view of economics as a moral science, whose methods cannot be the same as those of natural science. ;In Keynes's view, theories of decision-making which pretend to mathematize it are misleading, as was the overly intellectual view of human nature held by the Bloomsbury group. ;Keynes argues that participants in business life fall back on a set of heuristic conventions; they agree, for example, to expect for the future the same level of interest rates which prevails at present. Nevertheless, only those participants in business life who are wiser than average and who take long views will succeed in maintaining steady, sound expectations about the future. The confidence of others is deeply unstable; their expectations swing wildly, responding to passionate hopes and fears. ;To counteract the bad effects of these passionate movements, and also to reduce inequality of wealth , Keynes argues that government should intervene to a significant extent in economic affairs, while yet respecting individual initiative