WILLIAM H. JANEWAY
CAMBRIDGE – In January 1922, a 19-year-old University of Cambridge undergraduate challenged a recently published work of philosophy by a fellow of King’s College, Cambridge, a man twice his age and well on his way to recognition as Britain’s leading public intellectual.
In the uninhibited style that is so characteristic of Cambridge argumentation, Frank Ramsey laid into John Maynard Keynes’s Treatise on Probability, which had proposed that there exists an objective probability relation between any two non-contradictory statements. Keynes had conferred on probabilities a status independent of anyone’s beliefs about the likelihood that the second statement would follow from the first. But Ramsey objected that, “There is no such probability as the probability that ‘my carpet is blue’ given only that ‘Napoleon was a great general.’”
Much would depend on this intellectual encounter, for Keynes came to accept Ramsey’s critique, and followed the younger man in accepting that necessarily fallible subjective beliefs about the future play a role in any decision to act. In turn, a deeply embedded theme running through Keynes’s 1936 masterwork, The General Theory of Employment, Interest, and Money, is that pervasive uncertainty informs all of our forward-looking actions. Decisions to invest resources today for more or less probable returns tomorrow are based on “long-term expectations” that are themselves inherently fragile. The implication is that a decentralized capitalist economy can fall short of employing all available resources, creating the need for the state to step in and “stabilize an unstable economy,” as the economist Hyman Minsky once put it.
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