Keynes on Probability and Decision: Evidence from the Correspondence with Hugh Townshend

15 Pages Posted: 3 Jun 2015

See all articles by Carlo Zappia

Carlo Zappia

University of Siena - Department of Economics and Statistics

Date Written: February 15, 2015

Abstract

In the literature on his philosophical ideas the correspondence Keynes had with Hugh Townshend over the just-published General Theory has attracted significant attention. Excerpts from the exchange have been used as a relevant piece of evidence by scholars who claim that Keynes came to reject rational decision criteria, thus focusing on the necessity for economic agents to form expectations on market sentiment, rather than fundamentals. This note concentrates instead on the whole correspondence and tries to show that a comprehensive reading of the exchange between Keynes and Townshend, unfolding through the years 1936-1938, suggests that its discussion thread was more technical than usually understood. It is argued that the correspondence provides evidence for the fact that Keynes still had a keen interest in a problem left unsolved in the Treatise on Probability, namely, the definition of an alternative to what he termed “normal ethical theory” in the Treatise and identified with “strict mathematical calculation” in the General Theory. The correspondence reveals that the issue of whether a useful decision rule can be devised under uncertainty still appears central in Keynes’s thought in 1938.

Keywords: probability, decision-making, Keynes

JEL Classification: B21, D21

Suggested Citation

Zappia, Carlo, Keynes on Probability and Decision: Evidence from the Correspondence with Hugh Townshend (February 15, 2015). Available at SSRN: https://ssrn.com/abstract=2612951 or http://dx.doi.org/10.2139/ssrn.2612951

Carlo Zappia (Contact Author)

University of Siena - Department of Economics and Statistics ( email )

Piazza San Francesco 7
Siena, Siena 53100
Italy

HOME PAGE: http://docenti.unisi.it/carlozappia/

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