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A cunning purchase: The life and work of Maynard Keynes

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Yet I glory More in the cunning purchase of my wealth Than in the glad possession Ben Jonson, Volpone PORTRAIT OF THE ECONOMIST AS A YOUNG MAN On 21 June 1921, Maynard Keynes delivered the presidential address to the annual reunion of the Apostles - a secret society of the Cambridge University students and alumni which included such luminaries as Alfred North Whitehead, Bertrand Russell, G. E. Moore and Henry Sidgwick. What had united the Apostles of Keynes's own generation were their commitments, learned from G. E. Moore, to absolute truth and to the search for friendship and beauty. The ideal career for Keynes's cohort of Apostles would have been to become an artist, creating beauty and living in a community of other artists with whom one had close bonds of friendship. But what should one do if one simply did not have the talent to become an artist? In his address, Keynes seems to suggest that the best option for those who lack artistic talent may be to use their talents to pursue a career in finance or business. Quoting Ben Jonson, Keynes argued that the true reward of such activity lay not in wealth itself so much as in the 'the cunning purchase of… wealth'.

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... Some money (albeit rather limited) was to be made from lecturing and supervising, and Keynes also derived income from journalism and from his appointment to the board of the National Mutual Life Assurance Company in 1919; the worldwide success of the Economic Consequences meant that Keynes was able to call on yet another source of money to, amongst other things, help pay for his forays into the stock market. However, the claim by Backhouse and Bateman (2006: 2) that the book gave Keynes "financial security" is accurate only in a narrow sense: royalties were indeed significant, but Keynes had to rely on the same money to bail him out of difficulty in mid-1920 when a syndicate he had invested in went wrong. suggest that this new-found wealth played some part in making King"s a more popular choice for those students wanting to study economics at Cambridge, in turn helping to maintain the College"s strong tradition in the subject. ...
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Various explanations have been put forward as to why the "Keynesian. Revolution occurred. Some of these point to the temporal relevance of the General Theory while others highlight the importance of more anecdotal evidence, such as Keynes.s relations with the Cambridge "Circus.. However, no systematic effort has been made to bring together these and other factors under one recognised framework of analysis. This thesis attempts to fill this gap by making use of a well-established tradition of work within the history of science literature devoted to identifying the factors which help to explain why certain research schools are successful and why others fail. This body of work is based primarily on the ideas of Jack Morrell and Gerald Geison. More specifically, Morrell and Geison make use of a combination of 14 intellectual, technical, institutional, psychological and financial factors which, they argue, help determine the relative performance of research schools. We apply the research school approach to the development very specifically of macroeconomics in the 1930s and 1940s. Our findings suggest that it does indeed provide a reasonably coherent explanation as to why the revolution in macroeconomics witnessed during this period was specifically labelled "Keynesian., this despite the fact that Keynes was far from being the only economist attempting to gain dominance for his ideas. Thus, as well as Keynes, we apply the same research school analysis to the cases of Hayek and Kalecki and use it to explain why they were overshadowed by Keynes. On a final note, although it is clear that Keynes independently possessed a number of the attributes necessary to establish a successful and sustainable research school, the thesis also identifies the theories and activities of Marshall as providing an important foundation from which Keynes was able to mount his own revolution.
... ) .The Keynes-Knight and the de Finetti-Savage's Approaches to Probability: an Economic Interpretation. History of Economic Ideas, Vol.XXIV,no.1,pp.105-124.17Backhouse,R. & Bateman ,B. (2006)."A cunning purchase :the life and work of Maynard Keynes". InBackhouse and Bateman (eds.).The Cambridge Companion to Keynes. Basingstoke :Palgrave Macmillan,2006. Bateman, Bradley.(2003).The end of Keynes and philosophy? In Runde, J. & Mizuhara, S. (Eds ). (2003). The Philosophy of Keynes' Economics. London: Routledge. Boole, George. (1 ...
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This chapter offers an analytical assessment of Keynes’s influence on post-war arts policy by examining the Arts Council of Great Britain (ACGB) as a policy model. It argues that both Keynes’s political philosophy as a Liberal and his underlying moral approach to government policy shaped his approach to arts policy. Two organizations with which Keynes was involved inspired his plans for the ACGB: the wartime Council for the Encouragement of Music and the Arts (CEMA) and the University Grants Committee (UGC). He was appointed chairman of CEMA in 1942, and as bursar of Kings College, Cambridge, knew about government funding of academic research. Two characteristics of the policy model—the notion of ‘distance’ from government and the emphasis on professional standards—both associated with Keynesian cultural thinking, are explored in this chapter.
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J M Keynes’s wide ranging discussions of interval estimates and their application in chapter III of the A Treatise on Probability (TP,1921) was mistaken by Frank Ramsey to be a discussion of ordinal estimation in 1922 and 1926. Ramsey completely misunderstood how Keynes’s logical theory of probability was operationalized. This catastrophic, intellectual blunder was then passed on from Frank Ramsey by way of Gay Meeks and Robert Skidelsky to Rod O’Donnell, Bradley Bateman, Anna Carabelli, Jochen Runde, and a host of others. Philosophers were not immune. Henry E Kyburg and Isaac Levi, for instance, also concluded that Keynes had to have been working with ordinal probabilities because they limited their reading of the TP to Part I. This paper pinpoints where in chapter III this devastating blunder by Ramsey occurred. Ramsey mistook Keynes‘s discussions of interval probabilities for discussions of ordinal probabilities. Ramsey made one of the greatest intellectual blunders in the history of science and can no longer be considered a major contributor to work in decision theory and probability.
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Adam Smith was the first economist, philosopher or mathematician in history to give a clear and specific definition of what the term “uncertainty” meant and to apply it consistently in his analysis of decision making in the Wealth of Nations. The term uncertainty for Smith, as it was for Keynes with his weight of the evidence variable, w, refers to epistemological uncertainty and has nothing whatsoever to do with the ontological uncertainty claims made by the Post Keynesian and Institutionalist schools of economics. Smith also was the first to recognize that uncertainty comes in different degrees or gradations. This paper covers Smith’s application of his uncertainty concept in Part I, chapter XI. This material has not been examined since Smith wrote his Wealth of Nations in 1776. Smith’s approach to decision theory leads directly to the use of probabilistic interval estimates and an emphasis on the lower bound.
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Fèvre compares John M. Keynes’ and Walter Eucken’s respective ideas on the issue of economic power. This chapter analyses, in particular, the consequences this entails on both Keynes’ and Eucken’s visions of how to manage a market economy. Fèvre shows that while Keynes put his faith in the complementary nature of private and public bodies as a way to reach a balance of interests, Eucken favoured the existence of an independent office in charge of monitoring competitive market structures, disempowering private agents.
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Adam Smith and J M Keynes were both practitioners of virtue ethics who rejected Benthamite Utilitarianism. Their axiomatic foundations consist of the following three axioms only. The first is that probabilities are nonadditive, in general. Additivity is a special case. The second is that probability preferences are generally nonlinear. Linearity is a special case. The third axiom, which follows from the first two, is that the relevant information, data, evidence or the knowledge base required in order to make decisions is generally incomplete. A State of completeness of the relevant information, data, evidence or knowledge base is a special case. The axiomatic structure of Benthamite Utilitarianism is practically identical to that which underlies the Rational Expectations-Real Business Cycle – Dynamic Stochastic General Equilibrium approaches. Bentham’s first axiom was that all probabilities (“uncertainties”) were numerical and additive. Bentham’s second axiom was that all probability preferences were linear. The whole is nothing more than the individual sum of each part. The third axiom was that all the relevant information, data, evidence or knowledge base is complete, so that individual decision makers can make rational (optimal) decisions in both the short run and long run. Based on these three axioms, Bentham asserted that all rational decision makers would be able to actually maximize utility and returns as long as government would “be quit” and “stay out of the sunlight” of businessmen .The normal result would be that an economy would always be operating on the boundary of the Production Possibilities Frontier unless an external shock (war, revolution, plague, etc.) occurred. Smith and Keynes’s axioms are more general than those of Jeremy Bentham and his students. It is impossible to maximize utility or profits, in general, for Smith and Keynes, except as a very special case. The only conclusion possible is that the Rational Expectations-Real Business Cycle – Dynamic Stochastic General Equilibrium approaches are all very special cases of the more generalized Smith – Keynes axiom set. Keynes did exactly what he said he would do in the General Theory on page 3. He generalized classical and Neoclassical theory by providing a more general axiomatic structure .Modern economists are still working with the special theory of Bentham. Note that it is mathematically impossible for the Smith -Keynes theory to be a special case of Neoclassical theory as the Smith -Keynes approach allows precise ,exact numerical probabilities if the lower probability estimate equals the upper probability estimate ,so that the interval valued probability converges to a single number.Neoclassical theory does not allow for the specification of imprecise probability as it would then be impossible to Maximize utility ,as assumed by Bentham. The only conclusion possible is that neoclassical theory is a special theory and a special case of the Smith -Keynes approach.All neoclassical results collapse if the probabilities are interval valued.
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Abstract Keynes’s 1931 acknowledgement, that Ramsey’s theory of subjective degree of belief, based on numerically precise probability, was acceptable to him in the special case where w=1, has been constantly misinterpreted. This misinterpretation follows from the lack of understanding of Keynes's weight of the argument relation. This required that Keynes’s second logical relation of the A Treatise on Probability, the evidential weight of the argument, V(a/H)=w,0≤w≤1, where w=K/(K+I) and K defined the amount of relevant knowledge and I defined the amount of relevant ignorance, was defined and explicitly taken into account. It has been completely overlooked by all commentators that Keynes also stated in the same comment in 1931 that Ramsey’s theory did not deal with Keynes’s rational degrees of belief, P(a/h)=α,where 0≤α≤1. Only in the special case where w=1 does Keynes accept Ramsey’s approach because then the lower probability also equals the upper probability, which means that you now have additive, precise numerically definite probabilities. Keynes conceded to Ramsey what he had always agree about, that the purely mathematical laws of the probability calculus can be interpreted as coherence constraints requiring that the probabilities of rational decision makers must be consistent with the assumption of additivity if, and only if, w=1. The literature on Keynes’s logical probability relation, P, has failed to grasp Keynes’s very clear statements supporting it.Keynes's other logical relation ,V, has also been ignored.
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A major error ,committed by all philosophers and economists in the 20th and 21st century who have written on the 1931 comment of Keynes on Ramsey about “…I yield to Ramsey, I think he is right”, is their failure to recognize that Keynes’s logical theory of probability is an imprecise theory of non additive probability based on intervals and dealing with rational degrees of belief, whereas Ramsey’s theory is a precise theory of additive probability that deals with degrees of belief only. The two theories merge only in the every special case where Keynes’s weight of the argument, V(a/h) =w,0≤w≤1, has a value of w=1 and all probability preferences are linear. Nowhere in any of Ramsey’s publications during his life is there ANY recognition on his part that the two theories are diametrically opposed except in the special case where w=1 and probability preferences are linear. It should have been obvious to Ramsey, if he had indeed read the book that he claimed he had read, that Keynes’s probabilities MUST be non additive if, as Ramsey also failed to recognized, only a partial order can be defined on the probability space.
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This chapter explores how Walter Eucken situated himself in respect to John Maynard Keynes’s thought. It will be shown in particular that Keynes and Eucken were less alien to one another than is commonly assumed in the secondary literature. By considering together Keynes and Eucken’s letters to Hayek in response to The Road to Serfdom (1944), a somehow shared criticism is revealed. Keynes and Eucken both notably concentrated on the state positive assignments in order to ensure the proper functioning of a decentralised market economy. Moreover, there was a significant parallel in both methodological and theoretical arguments. Eventually, the Keynes/Eucken contrast proved meaningful for those who wanted to shed light on how they both left such a long-lasting mark on post-WWII European Liberalism.
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Keynes recognized that there were a few cases where his rational analysis of decision making under conditions of uncertainty and risk using: (a) interval valued probability in Parts II and III of the A Treatise on Probability, (b) decision weights in Part IV of the A Treatise on Probability ,or (c) safety first, based on the use of Chebyshev’s Inequality, in Part V of the A Treatise on Probability, would result in a stalemate. Although Keynes introduced his concept of caprice to deal with this problem in Part I in chapter III on p.30 of the A Treatise on Probability, a complete understanding requires a mastery of his mathematical analysis in Chapter XV, where Keynes presented part of his mathematical analysis of his Boolean based theory of imprecise, indeterminate interval valued probability. Once the link between page 30 of Chapter III and Pages 160-163 of Chapter XV is understood, then Keynes’s use of caprice in the General Theory and the Keynes-Townshend correspondence can be seen to be an important, but small, part of his general decision theory of the A Treatise on Probability which he applied as a specific decision theory in economics in the General Theory and after.
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M Keynes’s two logical relations of rational degree of probability, α, 0≤α≤1 and Evidential Weight of the Argument, w, 0≤w≤1, where w measures the degree of completeness of the evidence, can’t be represented or associated with ordinal probability, although Keynes’s theory of probability can easily deal with ordinal probability with the aid of Keynes’s principle of indifference if symmetries are present. α can be, in some limited instances, represented by a numerical, precise, definite, exact, additive probability if, and only if, w=1, although, in general, for w<1, it must be represented by an non additive interval estimate of probability or by a decision weight, like Keynes’s original, path breaking innovation of his conventional coefficient, c. Nowhere in Boole’s 1854 The Laws of Thought is any concept of ordinal probability discussed analyzed or applied in any detail. This is because ordinal probability can never deal with overlapping estimates of probability, which creates problems of non comparability, non measurability or incommensurability that Boole and Keynes solved with interval valued probability.
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Keynes developed a number of technical, mathematical tools for dealing with the problems of uncertainty (ambiguity, vagueness, indeterminate probabilities, imprecise probabilities) in his A Treatise on Probability in 1921 (and in his earlier Fellowship Dissertations of 1907 and 1908) that continue to be overlooked by practically all academics in the nearly 100 years since its publication in 1921. Keynes’s technical and mathematical modeling developments took place in chapters 15-17 of Part II of the A Treatise on Probability, chapters 20 and 22 of Part III of the A Treatise on Probability, Chapter 26 of Part IV of the A Treatise on Probability, and chapters 29 and 30 of Part V of the A Treatise on Probability. Part II of the A Treatise on Probability included Keynes’s original work dealing with non –additive probabilities that was based on the original work of George Boole in his 1854 The Laws of Thought. Keynes’s Boolean upper and lower bounded probabilities, which Keynes categorized as inexact measurement and approximation, established his complete grasp of the concept of interval valued probability. The American Theodore Hailperin showed in 1986 that both Boole and Keynes were using early versions of linear programming techniques to solve both linear and non linear systems of equations and inequations. Keynes used the name “non –numerical probability“ when discussing his no additive, non linear interval valued probability approach. Keynes’s approach has been erroneously identified as an ordinal probability approach by all Post Keynesians, Institutional and heterodox economists, who were greatly influenced by the 1975 paper on Keynes and uncertainty in HOPE by E R Weintraub, which misinterpreted Keynes in terms of G L S Shackle’s theory of possibility. Part III of the A Treatise on Probability, building on Part II’s interval valued probability concept, developed the concept of finite probability, applicable to both numerical and non numerical (interval valued) probabilities, in order to deal with applications of probability to Keynes’s concepts of induction, based on degrees of analogy, involving degrees of similarity and dissimilarity using human memory ,intuition and pattern recognition. Part IV of the A Treatise on Probability provided the first decision weight approach to decision making, Keynes’s conventional coefficient of weight and risk, c, that incorporated both non linear probability preferences and non additivity by the use of decision weights .These decision weights incorporated Keynes’s logical analysis, contained in chapter 6 of the A Treatise on Probability of his Evidential weight of the argument approach, V(a/h),which was a logical relation like Keynes P(a/h)=α, 0≤α≤1,but which Keynes waited to provide the comparable mathematical analysis for in chapter 26.In chapter 26,Keynes set V(a/h) equal to w,where w was normalized on the unit interval, so that V(a/h) =w, 0≤w≤1, holds. Keynes then defined uncertainty in the General Theory as an inverse function of V in chapter 12 on page 148 in footnote 1. Keynes then defined his conventional coefficient of weight and risk, c, to equal the standard EMV and SEU rules multiplied by the decision weights [(2w/1+w)] for non additivity and [(1/(1+q)] for non linearity. F Y Edgeworth recognized Keynes’s approach as breaking new ground. However, his plea for reader assistance from subscribers to Mind was ignored. Part V of the A Treatise on Probability provided the first “safety first” approach to decision making. As acknowledged by Edgeworth, Keynes used Chebyshev’s Inequality to establish lower bounds for decision problems in order to minimize risk (Keynes, 1921, pp. 353-358). Samuelson, while analyzing Keynes‘s simplified Least Risk analysis on p. 315 of the A Treatise on Probability, unfortunately overlooked Keynes’s generalized approach using Chebyshev’s Inequality in chapter 29. Samuelson also overlooked on this same page Keynes’s development of the logical and mathematical tools needed to specify the investment multiplier in the General Theory, as well as Kahn’s employment multiplier on p.183 of his June, 1931 article in the Economic Journal. Keynes major contribution in the TP was to show how the use of inexact and imprecise approximation techniques could effectivel replace the emphasis placed on the use of precise probability and mathematical expectations.The false binary claim of Post Keynesians that ,since Keynes rejected mathematical expectations the only choice left is ordinal probability is the result of an extreme ignorance on the part of heterodox economists like D.Moggridge,R.Skidelsky and R. O'Donnell concerning Keynes's development of inexact measurement and approximation in the TP and GT .
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The tremendous attraction and allure of Bentham’s original rational, utility maximizing, calculator model, which Bentham wrote out in plain English so as to capture as large an audience as possible, to economists has been greatly underestimated by the opponents of the ‘Homo Economicus’ model, which was the creation of Jeremy Bentham in 1787, the same year that he launched his attacks on both Adam Smith’s The Theory of Moral Sentiments (1759) and The Wealth of Nations (1776). Benthamite Utilitarian ethics allows a practitioner to appear to be a hard scientist because he/she will be using a lot of equations and numbers, what can be called mathematical benefit – cost analysis, in his/her argument, as opposed to the user of duty ethics or virtue ethics, who will not be using any such mathematical approach. Bentham‘s shrewd, in depth understanding and grasp of the desire for approbation, recognition, and applause on the part of economists, who wanted to be held in the same regard as physicists, leads directly to the neoclassical economics of Max U, which is simply a mathematical translation of Bentham’s already completely worked out concept of a rational calculator, adding marginal utility and diminishing marginal utility to utility maximization. New neoclassical economists then added the rational expectations-real business cycle-Dynamic stochastic General Equilibrium approach, based on the Normal and Log Normal probability distributions, which extends Bentham’s basic static pendulum-oscillation, external, exogenous shock model to intertemporal analysis. Bentham recognized that Smith’s emphasis on an inexact, interval valued, imprecise approach to probability, due to the fact of uncertain evidence (1776,pp.105-113,228-245,419-423,714), had to be undermined if his utilitarian ethics approach, based on precise and exact utility maximization, was to succeed in replacing Smith’s Virtue ethics approach. Bentham similarly recognized that he had to attack and neutralize Smith’s emphasis on the internal, endogenous threat to the macro economy that came from a certain segment of the upper income class that Smith labelled as prodigals, imprudent risk takers and projectors, in order to replace Smith’s virtue ethics emphasis on the virtues of prudence and temperance, which directly conflicted with Bentham’s emphasis on utility maximization and claim that the love of money was an insatiable desire of all men. The virtues of prudence and temperance require the complete total rejection of any insatiability assumption. J. M Keynes, following Smith’s approach, put forth a nearly identical version of Smith’s original inexact approach to measurement that was based on Boole’s upper – lower probabilities approach. Keynes’s inexact approach to probability in Part II of the A Treatise on Probability, and statistics in part V, which he used in the General Theory as the foundation for his liquidity preference theory of the rate of Interest, which he called approximation in chapter 4 of the General Theory, directly challenged the neoclassical followers of Bentham (Jevons, Marshall, Pareto, Cournot, Walras, Frisch, Tinbergen), who relied on an exact, precise approach to probability and statistics. Killing ‘Homo Economicus’ (Jeremy Bentham) can only be accomplished by adopting the Smith- Keynes inexact approach to measurement in order to challenge the Classical-Neo Classical-New Neo Classical exact approach to measurement. Max U collapses if the probabilities are not precise and exact, so that they sum to one, where the whole is the linear, additive sum of all of the individual parts. Currently, there is no credible, intellectual threat from any heterodox school of economics, for instance,the economics and philosophy departments at Cambridge University ,England, to Bentham, a genius with an IQ estimated to be in the 180-200 range, who could be compared to Lord Sauron of Mordor in the Lord of the Rings Trilogy.
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is straightforward to demonstrate that Keynes’s logical theory of probability could not primarily be an ordinal theory of probability. The demonstration is based on three main points made by Keynes. Keynes’s first major point in the A Treatise on Probability covered Keynes’s extensive discussion of non additivity (the general inapplicability of the addition rule of the calculus of probabilities) in Part II of the A Treatise on Probability (1921), as well as his many worked out problems using interval valued probability in Part II of the A Treatise on Probability (1921). Any attempt to juxtapose ordinal probability and non additivity is an oxymoron because ordinal probability can’t be added or multiplied. Part II of the A Treatise on Probability has nothing to do with ordinal probability. Keynes’s second major point was that the difficult topic of developing an interval valued approach to probability can be avoided by using decision weights that translate additive probability into non linear and non additive decision weights. Keynes’s conventional coefficient of weight and risk,c, was designed to allow his interval valued probability concept to be translated into non linear ,non additive coefficients or decision weights while starting the analysis using additive probability.It is mathematically and statistically impossible to do this with ordinal probability. Keynes’s third major point in the A Treatise on Probability shows that Keynes’s discussion of statistical frequencies involves his use of interval valued probability through the use of upper and lower limits or bounds,an approach identical to that used by Keynes in Part II. None of Keynes’s results from Parts II ,III, IV, and V of the A Treatise on Probability using either interval valued probability or decision weights, first introduced by Keynes to deal with the problems of non linearity and non additivity are alluded to by any Post Keynesian or Fundamentalist Cambridge Keynesian in any article or book written by them over the last 40 years. O’Donnell (2019) and Dow (2019) are have simply overlooked all of Keynes’s analysis in Part II, IV, and V of the TP dealing with measurement. O’Donnell (2019) and Dow (2019) rely completely on a very severe misinterpretation of pages 38-40 of the TP, as well as the diagram on page 39. The diagram on page 39 of the A Treatise on Probability illustrates the linear and additive probabilities of OAI with the nonlinear (quadratic) and non additive nature of the probabilities of all of the other paths. There is no theory of ordinal probability used, developed, deployed, or applied on pp.38-40 of the TP.
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