From Early Philosophy to A Treatise on Probability
Keynes came to economics after he took his degree and, informally, learning from Marshall while preparing for the Civil Service examination. As an undergraduate, while formally reading mathematics, it was philosophy that grabbed his attention.
He was a member of a “secret” society called The Apostles, where students read papers on a wide range of subjects. In Keynes’s time they were much influenced by the philosophy of G.E. Moore, for whom the contemplation of beauty and the enjoyment of friendship were the true purposes of life. Keynes responded to Moore with an essay on beauty and three papers on ethics. He also wrote a long essay on political philosophy, taking much (but not his conservatism) from Edmund Burke. Under the influence of Moore, he developed an Ideal, which included not only Moore’s concept of the good life but also his acknowledgement that nothing in personal life or society can be considered as certain; history does not repeat itself, and therefore the future is unknown and unknowable. This poses a challenge both to ethical conduct when we do not know the consequences of our actions and to the meaning we attach to knowledge and rationality.Moore’s answer to the ethical problem was to fall back on convention as the repository of accumulated wisdom. Keynes’s critique of this position led him to develop a theory of rationality under uncertainty, which he first submitted to King’s College as a fellowship dissertation in 1908. It was published in 1921 as A Treatise on Probability (hereafter TP).
In an uncertain world, all knowledge is only probable. Economics had inherited the idea, which comes down from Greek philosophy, that rationality can only coexist with certainty. A later modification allowed for “certainty equivalents” derived from classical probability - the sort of probability that pertains to repeated throws of fair dice.
For Keynes, the fact that the future is uncertain takes us beyond the limited sphere to which classical probability applies. Radical uncertainty, as it has come to be known, was simply a fact, but a fact that need not paralyse action or defeat rationality: rather, rationality and rational action had to be redefined. A rational approach to decision-making under uncertainty was to establish a “rational belief” in the link between a proposition and its probable outcome, by scrutinizing the available evidence, weighted according to its (probable) reliability and relevance.The logic of this process is not watertight, not demonstrable, as in classical logic. It belongs to “human logic”, and its rationality conforms to the meaning of rationality in ordinary language. In the ever-changing world in which we live, it is irrational to apply the “rationality” of certainty and perfect knowledge.
Rational belief, however, is an insufficient guide to ethical conduct. Since the consequences of our actions are at best only probable, Keynes proposed that rational ethics should be based on motive rather than consequences. For example, Keynes accepted the profit motive but decried the love of money for its own sake. For him, “being good” is the key ethical principle: an action is good if it is directed to something intrinsically worthwhile rather than toward some ulterior goal. Even Keynes’s pragmatism had its roots in ethical principles. To him, both economics and politics dealt only with means. They were facilitators of the good life, never ends in themselves.
Keynes developed early the philosophical foundations on which his economic thinking stands but went on exploring its ramifications. It took a long time for the philosophical thinking of TP to become fully incorporated into his economic theory; not until The General Theory in fact. The journey through economic analysis to the point where his earliest work and his last book are united is a long and tortuous one. We now trace the main signposts of that journey.