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Chapter 18 of the General Theory “Further Analysed”: The Theory of Economics as A Method

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  • Anna M. Carabelli
  • Mario A. Cedrini

    (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)

Abstract

In 1987, Greenwald and Stiglitz accused Keynes’s summary of the General Theory in chapter 18 of relying upon “neoclassical and Marshallian tools”. A number of contributions have on the contrary emphasized the methodological importance of this chapter, which this paper revisits in the light of A Treatise on Probability. It thereby shows that the notions of cause and dependence used to discuss the relationships between independent and dependent variables of the General Theory are related to the concept of “independence for knowledge”, which concerns logical connections between arguments rather than material connections between events. We demonstrate that such logical connections established in chapter 18 are rediscussed in chapters 19-21, where Keynes allows for probable repercussions between the factors and removes the simplifying assumptions previously introduced. After stressing the methodological continuity this method provides with the analysis of credit cycles in A Treatise on Money, we argue that chapter 18 is an indispensable tool to decode the internal text structure of the General Theory. We thus characterize the latter as a vademecum to the complex economic world, the author providing an analytical method allowing – and requiring – the readers to emulate his efforts to grasp the complexity and interdependence of the economic material.

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Paper provided by SEMEQ Department - Faculty of Economics - University of Eastern Piedmont in its series Working Papers with number 128.

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Date of creation: Mar 2011
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Handle: RePEc:upo:upopwp:128

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Keywords: John Maynard Keynes; The General Theory; complexity; economic methodology;

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  1. Claudio Sardoni, 1990. "Chapter 18 of the General Theory: Its Methodological Importance," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 12(2), pages 293-307, January.
  2. Rod O'Donnell, 1995. "Keynes on Aesthetics," History of Political Economy, Duke University Press, vol. 27(5), pages 93-121, Supplemen.
  3. J. B. Davis, 1990. "Keynes and Organicism," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 12(2), pages 308-315, January.
  4. Marchionatti Roberto, 2009. "J. M. Keynes, thinker of economic complexity," CESMEP Working Papers, University of Turin 200902, University of Turin.
  5. Chick, Victoria & Dow, Sheila C, 2001. "Formalism, Logic and Reality: A Keynesian Analysis," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 25(6), pages 705-21, November.
  6. Anna Carabelli & Nicolo De Vecchi, 1999. "'Where to draw the line'? Keynes versus Hayek on Knowledge, ethics and economics," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 6(2), pages 271-296.
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Cited by:
  1. Cabelli, Anna & Cedrini, Mario, 2013. "Keynes's General Theory, Treatise on Money, and Tract on Monetary Reform: Different Theories, Same Methodological Approach?," CESMEP Working Papers, University of Turin 201302, University of Turin.
  2. Carabelli, Anna & Cedrini. Mario, 2013. "A Methodological Reading of 'The Economic Consequences of the Peace," CESMEP Working Papers, University of Turin 201304, University of Turin.
  3. Cedrini, Mario & Marchionatti, Roberto, 2013. "On the Theoretical and Practical Relevance of the Concept of Gift to the Development of a Non-Imperialistic Economics," CESMEP Working Papers, University of Turin 201303, University of Turin.

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