WEBVTT NOTE Philosophical Foundations of Keynesians 1 00:00:00.000 --> 00:00:12.000 I'd like today to discuss two areas in which I think Keynes' views on philosophy influenced his economic thought. 2 00:00:12.000 --> 00:00:20.000 These concern his theory of knowledge and his views on ethics and politics. 3 00:00:20.000 --> 00:00:28.840 Now, Keynes' views on theory of knowledge are expressed principally in a book of his 4 00:00:28.840 --> 00:00:37.080 that came out in 1921, which was his fellowship dissertation at King's College, Cambridge, 5 00:00:37.080 --> 00:00:41.200 called A Treatise on Probability. 6 00:00:41.200 --> 00:00:47.860 From the title of the book, one might not suspect that this is about the theory of knowledge, 7 00:00:47.860 --> 00:00:56.380 But unusually for a statement by Keynes, this is only slightly misleading as the treatise 8 00:00:56.380 --> 00:01:05.100 on probability is for a great part about technical issues of probability, but also is a much 9 00:01:05.100 --> 00:01:10.740 broader philosophical account of what the nature of knowledge consists of. 10 00:01:10.740 --> 00:01:18.420 Now, Keynes divided knowledge into two different categories, direct and indirect. 11 00:01:18.420 --> 00:01:24.540 Direct knowledge were things that we, such as things we see directly or can perceive 12 00:01:24.540 --> 00:01:32.500 directly such as I'm now looking at certain objects or certain shapes and I can't doubt 13 00:01:32.500 --> 00:01:37.140 that I'm actually seeing something, this is something that's known directly and as we'll 14 00:01:37.140 --> 00:02:07.140 We'll see later, Keynes thought there were other, there were truths about ethics that were also directly seeable, but most knowledge in his view fell into the indirect category, and it's here that issues of probability come to the fore, because he thought practically all knowledge, since it's indirect, involves probability, again not in the mathematical sense, but just in the sense that we know things not directly 15 00:02:07.140 --> 00:02:21.740 but just by inference or by evidence. In his view, there were logical principles that enable us to go from certain evidence to certain probable judgments. 16 00:02:21.740 --> 00:02:33.280 Just like in the famous syllogism, all men are mortal, Socrates the man, therefore Socrates is mortal, it follows logically given the premises are true, the conclusion is true. 17 00:02:33.280 --> 00:02:46.280 King's thought that given certain premises, it was logically true that such and such an event was probable given certain evidence. 18 00:02:46.280 --> 00:03:02.280 The only catch in this was he thought it was practically impossible to establish anything as knowable that way even though most of our knowledge rested on just this kind of indirect inference. 19 00:03:02.280 --> 00:03:25.680 When he, as an example of his skepticism about knowledge, he, and here he for one a few times resembles Austrian economists, he was very doubtful about the value of econometrics or measurement in economics and the collection of statistics, 20 00:03:25.680 --> 00:03:33.200 Although he himself had done some work in economic statistics in his work on Indian 21 00:03:33.200 --> 00:03:40.000 currency reform in 1909, he doubted that this was much more than of historical value. 22 00:03:40.000 --> 00:03:48.960 For example, in 1937, he reviewed some work by the famous econometrician, Niko Tinbergen, 23 00:03:48.960 --> 00:03:49.960 of Money. 24 00:03:49.960 --> 00:03:55.960 He said, how could we know just from certain collections of statistics that this is just 25 00:03:55.960 --> 00:04:01.400 anything more than a description of what certain events that have happened at one time or other, 26 00:04:01.400 --> 00:04:07.680 how could we conclude from this that there are any laws or any truths about what will 27 00:04:07.680 --> 00:04:12.440 happen just because certain things, certain mathematical relationships have been shown 28 00:04:12.440 --> 00:04:14.920 to occur in the past. 29 00:04:14.920 --> 00:04:20.520 So as I say, in this respect, he resembled, he took a somewhat position somewhat like 30 00:04:20.520 --> 00:04:25.800 that of the Austrians and you'll also find if you look at the general theory, although 31 00:04:25.800 --> 00:04:33.280 there are a few equations in it, there's actually very little math and he really didn't go in 32 00:04:33.280 --> 00:04:38.780 for that much unlike some of his latter-day disciples. 33 00:04:38.780 --> 00:04:45.220 Now, one thing, if he thought we couldn't get knowledge by statistics, then how could 34 00:04:45.220 --> 00:04:48.180 we get such knowledge as was available? 35 00:04:48.180 --> 00:04:56.460 Well, he thought that, as I say, in general, knowledge rests on induction, and he distinguished 36 00:04:56.460 --> 00:04:58.140 two different types of induction. 37 00:04:58.140 --> 00:05:03.300 One was pure induction, which is thinking that something will happen just because it's 38 00:05:03.300 --> 00:05:04.300 happened before. 39 00:05:34.300 --> 00:05:44.300 We see an analogy between the different instances that there's sort of some explanation we can come up with of why this relationship should hold. 40 00:05:44.300 --> 00:05:59.300 So we thought this would give us some reason to think that it might generally be true that if the price of a commodity goes up, the quantity demanded will go down. 41 00:05:59.300 --> 00:06:03.620 sort of very, as you see, very strictly reasoning by analogy. 42 00:06:03.620 --> 00:06:06.220 Now, one thing he was very insistent on 43 00:06:06.220 --> 00:06:09.300 is in this kind of reasoning by analogy, 44 00:06:09.300 --> 00:06:12.660 one couldn't just arbitrarily pick points of analogy, 45 00:06:12.660 --> 00:06:15.660 but one had to take account of all the analogies 46 00:06:15.660 --> 00:06:20.340 and disanalogies in a whole system of events. 47 00:06:20.340 --> 00:06:24.060 For example, in studying, he was very doubtful 48 00:06:24.060 --> 00:06:28.180 that one could just study particular individuals, 49 00:06:28.180 --> 00:06:34.700 Say, as it's done in the Austrian approach, where economics is developed from certain 50 00:06:34.700 --> 00:06:40.980 axioms of human action, and then one starts with individuals who are exchanging commodities 51 00:06:40.980 --> 00:06:45.700 and build up the theory of economics from that basis. 52 00:06:45.700 --> 00:06:51.980 Keynes thought doing that way would have been an abstraction from the whole system. 53 00:06:51.980 --> 00:06:57.380 One has to do things, sort of consider them all together, considering both the analogies 54 00:06:57.380 --> 00:06:59.380 The Theory of Money and Credit 55 00:07:27.380 --> 00:07:36.380 The concept of the wage unit on page 41, it's a measure of aggregate wages, not individual wages, and always concerned with aggregates. 56 00:07:36.380 --> 00:07:48.380 Now, one instance of this, in particular, is probably the most famous, is the so-called paradox of thrift that I'm sure most of you are familiar with from your textbook. 57 00:07:48.380 --> 00:07:55.380 Actually, Keynes never describes it in the general theory by that name, paradox of thrift. 58 00:07:55.380 --> 00:08:11.380 And he does say that while one individual can save, it doesn't follow that everyone in the economy can save because some people's saving may be offset by others. 59 00:08:11.380 --> 00:08:24.380 So in his view, you see how it's a fallacy to take account of how individuals react just by themselves and then build up the rest of economics from that. 60 00:08:24.380 --> 00:08:32.060 And he has to realize that, as he sees it, that the total system may be entirely different 61 00:08:32.060 --> 00:08:35.380 from just what happens when we take individuals into account. 62 00:08:35.380 --> 00:08:42.420 Now, if some people, when they explain this so-called paradox of thrift, say that King's 63 00:08:42.420 --> 00:08:48.420 point was that there is a fallacy of composition involved, that is to say, it doesn't follow 64 00:08:48.420 --> 00:08:51.300 if something is true of a part, it's also true of a whole. 65 00:08:51.300 --> 00:08:58.660 I think that's right, but most of the textbooks get the wrong thing as a fallacy composition. 66 00:08:58.660 --> 00:09:03.460 They'll say something like, King's thought a particular individual can add to his wealth 67 00:09:03.460 --> 00:09:10.340 through savings, but it's not true that everybody can add to his wealth through savings. 68 00:09:10.340 --> 00:09:14.420 Now he doesn't say that, but he says if you look at this passage from page 8 to page 3, 69 00:09:14.420 --> 00:09:20.700 he says that an individual can save, but it doesn't follow that all individuals can save. 70 00:09:20.700 --> 00:09:38.700 doesn't say anything to suggest that there's some individual who can save but not add to his wealth, but that's just a digression. I just put that in because I think it's important to be accurate about the stating things exactly as he had them. 71 00:09:38.700 --> 00:09:58.700 Now, again, another view of his that comes in, the philosophical view of his on knowledge that comes in very much in his economics, is again, with this idea of the total system, is that one has to consider the surface properties of things very closely. 72 00:09:58.700 --> 00:10:05.500 One can't claim that there are obviously certain underlying factors that really account for 73 00:10:05.500 --> 00:10:08.300 everything in the system. 74 00:10:08.300 --> 00:10:14.820 One has to go according to what the surface properties are and then have one's explanations 75 00:10:14.820 --> 00:10:15.820 from this. 76 00:10:15.820 --> 00:10:26.380 For example, Keynes places great emphasis on the fact that wages are negotiated in money, 77 00:10:26.380 --> 00:10:44.380 When he has his famous view that there can be an equilibrium with unemployment, many writers after this suggested, like Franco Modigliani had a famous article in 1949 on this, and Eric Lindahl also suggested this. 78 00:10:44.380 --> 00:10:52.960 They said Volkanes is assuming that wages are rigid downwards, that wages can't be lowered 79 00:10:52.960 --> 00:10:57.660 because it seems from elementary economic theory that if there's a surplus of a commodity 80 00:10:57.660 --> 00:11:03.420 then by lowering the price one can clear the market. 81 00:11:03.420 --> 00:11:13.660 So people wonder how can there be an equilibrium with unemployment if can't the workers simply 82 00:11:13.660 --> 00:11:15.660 The Theory of Money and Credit 83 00:11:43.660 --> 00:11:53.900 I mentioned that the bargaining takes place in money terms. So he thought it doesn't really matter 84 00:11:53.900 --> 00:12:01.020 what happens to real wages unless you could show that it somehow affects the way people bargain 85 00:12:01.020 --> 00:12:07.020 in money. It's not clear to me how the argument is supposed to go because I don't think it's correct, 86 00:12:07.020 --> 00:12:37.020 but that at any rate was his position. Now one thing I've perhaps given a wrong impression so far when I describe, I should give also one other instance, a famous one where Keynes stresses the surface properties is in his criticism of Mises' theory of interest in the general theory. I think this is the only time he mentions Mises' entire book which is on note on pages 192 and 193 and he said Mises has a very 87 00:12:37.020 --> 00:12:47.020 and the peculiar theory of interest, which he says corresponds to what he calls the marginal efficiency of capital. 88 00:12:47.020 --> 00:12:54.020 It doesn't actually correspond to marginal efficiency of capital, as Keynes defines it, but it does have some similarity to it. 89 00:12:54.020 --> 00:13:05.020 But he says Mises wrongly assumes that just because people decide to invest instead of consume, that they'll be able to do so. 90 00:13:05.020 --> 00:13:35.020 So, what Mises is forgetting is that interest is a monetary phenomenon, the interest rate is determined by demand and supply of loanable funds, so it doesn't matter if what Mises calls people's time preference shifts, there must be some way of having this affect the money market before it can have any, the effect, the kind of 91 00:13:35.020 --> 00:13:47.020 In fact, Mises was concerned with that to say, for example, supposing people's time preference lowers and as a result, entrepreneurs decide to increase investment. 92 00:13:47.020 --> 00:13:55.020 Now, the way Mises takes it, unless there's some peculiar circumstance, they'll be able to get the money to do so. 93 00:13:55.020 --> 00:14:01.020 But Keynes thought because the rate of interest is determined by the rate of time preference. 94 00:14:01.020 --> 00:14:20.020 But Keynes thought this wasn't right. It's the money that rate, that determines the rate of interest. One could have what he calls, even if people wanted to invest, they'd be unable to get the money to do it because money interest rates are too high for them to obtain this. 95 00:14:20.020 --> 00:14:40.020 to obtain this. So you see again how he rests everything on the surface properties because money is a, because the interest rate on the surface is a monetary phenomenon. He thinks one can't neglect that in determining the analogies and disanalogies in things. 96 00:14:40.020 --> 00:14:59.020 I've given so far a perhaps misleading impression of Keynes' views in that when I've spoken of his views on knowledge, I suggested that he did think there was at least some knowledge obtainable of this indirect kind by induction through analogy. 97 00:14:59.020 --> 00:15:29.020 Now, it isn't wrong to say that in the sense that he denied this, but he really wasn't sure about it, because he said all induction rests on what he calls the principle of limited variety, that's to say that certain things vary with certain other things, and it's not randomly, but certain things, what he called in the treatise on probability, logical or legal atoms, it's rather unusual terminology, it's sort of things that all 98 00:15:29.020 --> 00:15:42.020 If these occur, if there are things that always vary together, then we do have some basis for inductive inference, but we can't know that this principle of limited variety is true. 99 00:15:42.020 --> 00:15:54.020 I mean, you might have, supposing the economy is what he calls, on page 249 of the treatise, an organic system, that's, say, one that's always changing, and there aren't any constant relationships, 100 00:15:54.020 --> 00:15:58.020 The Theory of Money and Credit 101 00:15:58.020 --> 00:16:04.020 The Theory of Money and Credit 102 00:16:24.020 --> 00:16:33.020 They say Keynes did say that the economy was an organic system just like that, but he never does say that. 103 00:16:33.020 --> 00:16:46.020 I think they rightly point out that Keynes was influenced a lot by the philosopher G. Moore, who discussed organic unities, but that's an entirely different thing. 104 00:16:46.020 --> 00:16:56.420 And that concerns, that Moore's idea was that something can be, a whole can be better than the sum of its parts. 105 00:16:56.420 --> 00:17:03.020 That's if you take the parts of things and ask how good is each one, it won't necessarily be the case. 106 00:17:03.020 --> 00:17:06.020 If you add them all up, you'll get the good of the whole. 107 00:17:06.020 --> 00:17:10.420 You could have more good in the total than the part. 108 00:17:10.420 --> 00:17:16.540 So that really is quite different from what Keynes meant by an organic system and I don't 109 00:17:16.540 --> 00:17:21.300 think there's any evidence he called the economy an organic system. 110 00:17:21.300 --> 00:17:30.020 Now supposing we do have this kind of, we do get some analogies of the kind Keynes thinks 111 00:17:30.020 --> 00:17:31.020 appropriate. 112 00:17:31.020 --> 00:17:48.020 I should mention also, before this, what about the Misesian view that one can derive economics by strict deduction from logically true axiom. 113 00:17:48.020 --> 00:17:56.020 Well, Keynes doesn't directly comment on this, but I think it's clear what his views would have been on this. 114 00:17:56.020 --> 00:18:11.500 Now, if you hold the Misesian view, you're holding certain truths or synthetic, that say, to give us information about the world, but are also knowable without reference to experience. 115 00:18:11.500 --> 00:18:18.740 Professor Hoppe has written very well on this point, is basic to Mises' position. 116 00:18:18.740 --> 00:18:28.780 But Keynes didn't deny that there were such synthetic a priori truths, as these are called, but he was rather skeptical about them. 117 00:18:28.780 --> 00:18:37.580 He thought he did give examples that he thought might be such truths, but he had a very limited view of what they consist of. 118 00:18:37.580 --> 00:18:44.460 So I think that he would not have accepted the Misesian praxeology as a legitimate approach, 119 00:18:44.460 --> 00:18:55.460 because he would have thought this is making too many things synthetically, synthetically a priori, and we can't really know this. 120 00:18:55.460 --> 00:19:03.460 Now, there's one other part of his theory of knowledge that I think is very important in understanding is economics. 121 00:19:03.460 --> 00:19:14.460 This enables us to get to the second topic I suggested, which is his views on ethics and politics and how these affect his economics. 122 00:19:14.460 --> 00:19:24.460 Supposing we have a whole system, we do get certain knowledge by analogy in the way I've suggested Keynes thought might be possible. 123 00:19:24.460 --> 00:19:31.460 We then have the problem, how do we know in the system which things cause which other things? 124 00:19:31.460 --> 00:19:45.460 Now, Keynes has a very interesting treatment of causality in Treatise on Probability. It's just a brief comment, page 277, where he says, like most things, he's really not sure what the nature of causality is. 125 00:19:45.460 --> 00:19:54.460 He says there's one position that David Hume held that says one thing causes another, just to say that they're always in a constant relationship. 126 00:19:54.460 --> 00:20:01.460 Relationship 127 00:20:24.460 --> 00:20:30.700 to the investigator to separate out what he calls the independent and dependent variables. 128 00:20:30.700 --> 00:20:36.820 And he has a rather peculiar view of what these consist of, that the independent variables 129 00:20:36.820 --> 00:20:39.540 are the things that change faster. 130 00:20:39.540 --> 00:20:47.100 For example, he takes the money rate of interest as an independent variable because that fluctuates 131 00:20:47.100 --> 00:20:54.300 a lot, whereas money wage rates would be a dependent variable because these tend not 132 00:20:54.300 --> 00:21:02.900 not to shift so rapidly, or at least it was defined by his method of wage units. 133 00:21:02.900 --> 00:21:11.640 So one thing he's very concerned with here is that you get the ones that are changing 134 00:21:11.640 --> 00:21:14.600 rapidly and pick them as the causal agents. 135 00:21:14.600 --> 00:21:21.980 Now this isn't, why do you do it this way, it isn't purely a matter of what is likely 136 00:21:21.980 --> 00:21:51.980 to be true, but it's very definitely for purposes of control. In fact, in one passage in general theory, which I think is one of the keys to understanding the motivation book on page 247, where he discusses this question of dependent-independent variables, he said something like the independent variables might turn out to be the ones that are most able to be subject to conscious and deliberate control by the central authority. So he was sort of interested 137 00:21:51.980 --> 00:21:58.060 not just in studying the economy but changing it in a certain way and that's why he selected 138 00:21:58.060 --> 00:22:01.500 certain things as the independent variable. 139 00:22:01.500 --> 00:22:08.020 Now, before turning to his ethical views, I think there's one other thing I need to 140 00:22:08.020 --> 00:22:16.640 mention on his views on knowledge and this is his view of people's rationality or he 141 00:22:16.640 --> 00:22:23.480 He tended, except for a small elite of which he naturally included himself, to think that 142 00:22:23.480 --> 00:22:33.980 most people acted in a manner based on habit rather than on rational thinking. 143 00:22:33.980 --> 00:22:40.480 He tended in a very famous passage of the general theory. 144 00:22:40.480 --> 00:22:57.400 He suggests that even if there are reasons for doing something, one needs to have a sort 145 00:22:57.400 --> 00:23:02.920 of feeling of optimism in order to impel one to act. 146 00:23:02.920 --> 00:23:07.760 It isn't enough that there's a good case for something one sort of has to feel like 147 00:23:07.760 --> 00:23:09.400 doing it. 148 00:23:09.400 --> 00:23:17.280 I think this view in part derives from David Hume, whom Keynes studied very carefully and 149 00:23:17.280 --> 00:23:21.400 is one of the leading Hume scholars of his time. 150 00:23:21.400 --> 00:23:28.740 But where this comes in in his economics is that one reason he doubted that there would 151 00:23:28.740 --> 00:23:37.560 be an equilibrium, say, gained by cutting wages is he thought that this would depend 152 00:23:37.560 --> 00:23:42.000 and very much on how speculation took the matter. 153 00:23:42.000 --> 00:23:48.840 He thought it wouldn't necessarily be that businessmen would say, all right, real wages 154 00:23:48.840 --> 00:23:54.000 are now lower, therefore our costs are lower and we can now invest more. 155 00:23:54.000 --> 00:23:59.280 He thought businessmen might say, oh, well, maybe wages will go down even further, so 156 00:23:59.280 --> 00:24:01.800 we're still not going to invest. 157 00:24:01.800 --> 00:24:09.680 He tended, I think, disregarding the type of work Mises later did in his essay, Profit 158 00:24:09.680 --> 00:24:16.080 and Loss, and Kirzner on entrepreneurship, again, he tended to think of the entrepreneurs 159 00:24:16.080 --> 00:24:23.140 just as a class, he didn't consider that particular businessmen might be able to have correct 160 00:24:23.140 --> 00:24:29.520 ideas about the future and then by doing so would be able to bring the economy to equilibrium 161 00:24:59.520 --> 00:25:08.520 The Theory of Money is all irrational, but he just thinks there is this factor of animal spirits that needs to be taken into account. 162 00:25:08.520 --> 00:25:19.520 So now to turn to the second topic, which is Keynes' views on ethics and political theory and how they affect his economics. 163 00:25:19.520 --> 00:25:40.520 As I think other speakers will be going into more detail, Keynes was very influenced by the philosophers who were at Cambridge, which was his university in the early years of the century, particularly Jean Moore, but also others like John McTaggart, 164 00:25:40.520 --> 00:26:10.520 Richard Russell who was a very good friend of his Ludwig Wittgenstein I see and C.D. Broad and to some extent Alfred North Whitehead who was at Cambridge in a somewhat earlier period but it then shifted to the Imperial Technical College in London but this was probably at this time mainly when King was writing Trees on Probability he worked on it I think from the early years of the century until its publication. This was Cambridge was probably the leading century 165 00:26:10.520 --> 00:26:19.480 in the world for analytical philosophy. This is where really the, there was sort of really the top 166 00:26:19.480 --> 00:26:25.520 philosophers in the world were at this time. I mean a figure like C. D. Broad would have been 167 00:26:25.520 --> 00:26:31.760 a major figure anywhere else was just sort of a second-rater at Cambridge when they had Russell 168 00:26:31.760 --> 00:26:39.800 and Wittgenstein around. But one thing that Keynes was very influenced by Moore was that Moore thought 169 00:26:39.800 --> 00:27:09.800 I thought that when we say that something is good, we're just sort of, we can just intuit what this, what things are good. It's sort of goodness is what he called a simple, non-natural property, just like I can see, say, this lectern is brown, more held, I could see certain things are good, goodness isn't a physical quality 170 00:27:09.800 --> 00:27:25.800 Property Perceivable by Senses, but I can just intuit this, see things as good and more particularly how the best things were certain states of friendship and certain types of contemplation of beautiful objects. 171 00:27:25.800 --> 00:27:32.800 Now, in practice, this goodness of its highest sort could only be enjoyed by a small group. 172 00:27:32.800 --> 00:27:33.800 of Money. 173 00:27:33.800 --> 00:27:37.640 Again, this is the kind of group Keynes included himself in. 174 00:27:37.640 --> 00:27:44.640 He was a member of a society called the Cambridge Apostles, which was kind of an elite group 175 00:27:44.640 --> 00:27:45.640 of undergraduates. 176 00:27:45.640 --> 00:27:51.360 And he was later associated with the literary circle called the Bloomsbury set. 177 00:27:51.360 --> 00:27:57.880 This is after the neighborhood that most many of them lived in, which is near the Bloomsbury 178 00:27:57.880 --> 00:27:59.960 Square, near the British Museum. 179 00:27:59.960 --> 00:28:06.880 But people of this sort stress that they were kind of elite who were able to have this kind 180 00:28:06.880 --> 00:28:14.760 of higher activity of contemplation, whereas most people were irrational and needed to 181 00:28:14.760 --> 00:28:18.940 be subjected to direction by these experts. 182 00:28:18.940 --> 00:28:47.940 In 1935, he was writing a book on economics that would immediately revolutionize the subject just by his saying, just as soon as people realize he was right, or at least enough of the right people realize this, they would be able to put his ideas into effect. 183 00:28:47.940 --> 00:29:17.940 Eugen is assuming, he states, near the end of the general theory, that the ideas of intellectuals of his kind are of primary importance in leading the masses, sort of what, although in the 19th century he thought that material interests were more important, attached considerable importance to certain capitalists who were willing to invest regardless of this situation at the moment, 184 00:29:17.940 --> 00:29:31.940 He thought things had now changed in response to a letter from Dora Russell, which appeared in New States, saying, well, if this view is true, why haven't Keynes' ideas been put into effect yet? 185 00:29:31.940 --> 00:29:40.260 yet so he said he answered he said well i i haven't convinced people yet but i will so you see it's a 186 00:29:40.260 --> 00:29:48.180 complete reliance on his intellectual power as capable of leading the rest of society 187 00:29:50.340 --> 00:29:57.380 in his terms the socialization of investment you remember what i mentioned before he had thought 188 00:29:57.380 --> 00:30:07.380 He thought that when businessmen were investing, even if they wanted to do so, they might be blocked by the fact the money rate of interest was too high. 189 00:30:07.380 --> 00:30:18.380 Now, he thought there was a temporary cure for that, which is his famous fiscal policy of government spending, particularly on public works. 190 00:30:18.380 --> 00:30:23.140 proponent of public work spending as he said in one of his essays in his 191 00:30:23.140 --> 00:30:30.660 characteristic elegant literary style two pyramids two masses for the dead are 192 00:30:30.660 --> 00:30:38.060 twice as good as one not so two railways from London to York but this policy 193 00:30:38.060 --> 00:30:42.220 public work spending was just a temporary expedient what he really 194 00:30:42.220 --> 00:30:48.260 thought was necessary since he took a very dim view of the stock market and he 195 00:30:48.260 --> 00:30:54.260 in one occasion to a casino, another famous passage you discuss, 196 00:30:54.260 --> 00:30:58.260 the famous analogy of the stock market to a beauty contest. 197 00:30:58.260 --> 00:31:03.260 I won't go into the details of that, but that's very, very interesting logical. 198 00:31:03.260 --> 00:31:05.260 It has very interesting logical points in it. 199 00:31:05.260 --> 00:31:12.260 But he thought we should get rid of this entirely and have the government take over investment. 200 00:31:12.260 --> 00:31:18.360 He'd have what, as a result, he'd have what they called, what he called the euthanasia of the Rancier. 201 00:31:18.360 --> 00:31:26.660 The Rancier is the person who, sort of the, what's sometimes called satirically a coupon clipper. 202 00:31:26.660 --> 00:31:33.580 That's to say, someone who gets interests, say, on stocks or bonds and who, in Keynes's view, 203 00:31:33.580 --> 00:31:40.100 although I think quite wrongly, really didn't contribute much to the economy. 204 00:31:40.100 --> 00:31:46.100 He viewed the Ranthiers just as sort of engaging in a speculative game. 205 00:31:46.100 --> 00:31:48.100 So he wanted to eliminate these. 206 00:31:48.100 --> 00:31:53.100 Now euthanasia means sort of a happy death, it means painless death. 207 00:31:53.100 --> 00:31:57.100 One could question whether the Ranthiers would take that view of this, 208 00:31:57.100 --> 00:32:05.100 of their death in quite the way Keynes thought of it, but that's a matter he doesn't go into. 209 00:32:05.100 --> 00:32:21.660 to be socialized. He likes the idea of having a market for consumer goods, and he says that 210 00:32:21.660 --> 00:32:29.420 the idea of choice is a good one, particularly likes experiments that people might do in 211 00:32:29.420 --> 00:32:35.060 Getting Various Commodities, Getting Various Different Kinds of New Commodities, Particularly, 212 00:32:35.060 --> 00:32:42.660 and he allows some inequality of income because he says this is the way certain kinds of valuable 213 00:32:42.660 --> 00:32:50.220 things like art are produced by wealthy patrons giving them money. 214 00:32:50.220 --> 00:32:56.620 Of course, again, it's, I think, no coincidence that Keynes himself was a wealthy patron who 215 00:32:56.620 --> 00:33:05.140 and was responsible for various commissions in the British government dealing with art. 216 00:33:05.140 --> 00:33:11.700 So he allowed some inequality of income, but he wanted all investment to be socialized. 217 00:33:11.700 --> 00:33:19.220 I think if we recall how much of the economy concerns investment, this is really a very 218 00:33:19.220 --> 00:33:20.620 great deal. 219 00:33:20.620 --> 00:33:42.620 So sometimes Keynes is presented as somewhat of a moderate. For example, there's some people who cite Keynes' last article in 1946 on the balance of payments where he referred to much modern stuff which has gone sour and silly, but there's no evidence he meant his own views by that. 220 00:33:42.620 --> 00:34:12.620 I really don't think that's much, I mean he does quite clearly say in the general theory that he favors socialization of investment and he was, the one constant even throughout the book is his very negative view of interest and speculation on money, for example in the preceding chapter 23, he's very favorable to the mercantilist policy of piling up gold reserves and having the so-called 221 00:34:12.620 --> 00:34:14.620 The Theory of Money and Credit 222 00:35:12.620 --> 00:35:18.580 This will lead to major unemployment. So he thought that by having the government take 223 00:35:18.580 --> 00:35:26.940 over all investment, this will enable this problem to be solved since the government 224 00:35:26.940 --> 00:35:39.220 officials won't be dependent on speculative ideas. I should say this doesn't mean Keynes 225 00:35:39.220 --> 00:35:46.800 Mises was a Marxist in his views, he was quite hostile to Marxism, not so much on the grounds 226 00:35:46.800 --> 00:35:54.120 that he didn't like socialism, he speaks of favoring a liberal type of socialism, but he 227 00:35:54.120 --> 00:36:01.760 didn't like the idea of the proletarian ruling, the working class, he said, I am a bourgeoisie, 228 00:36:01.760 --> 00:36:08.760 This is my class. I don't want these inferior people taking over. 229 00:36:08.760 --> 00:36:16.760 So that was his principal objection to Marxism. Also, he thought that Marx's economics were outdated. 230 00:36:16.760 --> 00:36:22.760 He took a very dim view of the value of Marx's Das Kapital. 231 00:36:22.760 --> 00:36:28.760 He rather, in one letter, told off Bernard Shaw for overrating the book. 232 00:36:28.760 --> 00:36:35.840 In the book he said that no doubt Shaw was right that it had been influential, but that 233 00:36:35.840 --> 00:36:40.200 really didn't mean it had any significant ideas in it. 234 00:36:40.200 --> 00:36:49.280 So one thing one needs also to mention, again, I think this reflects in part Moore's influence. 235 00:36:49.280 --> 00:36:56.040 Moore, in addition to these intuitionist views I mentioned on nature of good, was in his 236 00:36:56.040 --> 00:37:02.560 His moral system, a utilitarian, he thought that, as I mentioned, what's good can be 237 00:37:02.560 --> 00:37:08.360 directly intuited, but he didn't say what the right thing to do is, is a matter of direct 238 00:37:08.360 --> 00:37:15.520 intuition. He thought the right thing to do is to produce the most good possible. Now, 239 00:37:15.520 --> 00:37:22.340 this is a utilitarian view. However, how was one to do this? In Moore's view, which he 240 00:37:22.340 --> 00:37:52.340 gives it the end of it near the end of his 1903 Finkepie Ethica he says it's almost it's impossible to tell what the consequences of various suggested alternatives are going to be we really can't calculate or determine what would happen if we did various things this is I think argument which those of you familiar with Professor Hoppe's work will find some 241 00:37:52.340 --> 00:37:59.220 and what familiar is, he used a variation of this argument, his own criticism of utilitarianism. 242 00:37:59.220 --> 00:38:06.580 So more thought in contrast to the view that one should have a rights-based morality, more 243 00:38:06.580 --> 00:38:12.740 thought that people ought to in general follow customary rules on the grounds that we have 244 00:38:12.740 --> 00:38:20.340 no real reason to think anything is better than that since we can't calculate consequences. 245 00:38:20.340 --> 00:38:50.340 Mises didn't agree with that in Trees on Probability. There's a section, I think, around page 307 where he says Moore is wrong about this because all this argument shows is we can't know the consequence of the certainty, but maybe we can know them with what's probably the case, but again, it's not everybody who's capable of knowing these things. It's again just this elite group. Most people are governed by habit or irrational impulses, and again, one needs an elite to 246 00:39:20.340 --> 00:39:28.340 Ethics and Political Philosophy and Ethics and the Economic Views that are familiar to you in the general theory. 247 00:39:28.340 --> 00:39:30.340 Thanks very much.