The Varieties of Subjectivism: Keynes and Hayek on Expectations

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The Varieties of Subjectivism: Keynes and Hayek on Expectations

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William N. Butos (Trinity College)
Roger G. Koppl (Fairleigh Dickinson University)

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Abstract

J.M. Keynes and F.A. Hayek had different economic ideas even though both were subjectivists seriously engaged with issues of time and uncertainty in economics. The source of the difference between their economic ideas was the difference between their philosophical ideas. Keynes was a Cartesian rationalist and justificationist; Hayek a critical rationalist and non-justificationist. We draw on Keynes's "A Treatise on Probability," Hayek's "The Sensory Order," and other works to defend our argument. Although Keynes and Hayek might both be called "subjectivists," there are varieties of subjectivism. Their subjectivist ideas are not fully compatible with one another and conduce to different theories of the market process. Hayek's theory, not Keynes's, allows us to say when markets will behave in the way Keynes described and when they will instead behave in more coordinated ways. In this sense, a Hayekian theory is needed to understand a Keynesian world.

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Paper provided by EconWPA in its series Method and Hist of Econ Thought with number 9505001.

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Date of creation: 16 May 1995
Date of revision: 17 May 1995
Handle: RePEc:wpa:wuwpmh:9505001

Note: wp5.1 file, forthcoming, Summer 1997, History of Political Economy
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B - Schools of Economic Thought and Methodology

References listed on IDEAS
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Coddington, Alan, 1982. "Deficient Foresight: A Troublesome Theme in Keynesian Economics," American Economic Review, American Economic Association, vol. 72(3), pages 480-87, June. [Downloadable!] (restricted)
Lawson, Tony, 1993. "Keynes and Conventions," Review of Social Economy, Taylor and Francis Journals, vol. 51(2), pages 174-200, Summer.
Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-95, September. [Downloadable!] (restricted)

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Roger Koppl, William Butos, 2001. "Confidence in Keynes and Hayek: Reply to Burczak," Review of Political Economy, Taylor and Francis Journals, vol. 13(1), pages 81-86, January. [Downloadable!] (restricted)
Theodore A. Burczak, 2001. "Profit Expectations and Confidence: some unresolved issues in the Austrian/Post-Keynesian debate," Review of Political Economy, Taylor and Francis Journals, vol. 13(1), pages 59-80, January. [Downloadable!] (restricted)
Anna Carabelli, Nicolò De Vecchi, 2001. "Hayek and Keynes: from a common critique of economic method to different theories of expectations," Review of Political Economy, Taylor and Francis Journals, vol. 13(3), pages 269-285, July. [Downloadable!] (restricted)
Pierre Garrouste, 2008. "The Austrian roots of the economics of institutions," The Review of Austrian Economics, Springer, vol. 21(4), pages 251-269, December. [Downloadable!] (restricted)
William Butos & Roger Koppl, 2004. "Carabelli & de Vecchi on Keynes and Hayek," Review of Political Economy, Taylor and Francis Journals, vol. 16(2), pages 239-247, April. [Downloadable!] (restricted)
Miguel A. Durán, 2005. "The problems of the the Co-Ordination problem," ThE Papers 05/09, Department of Economic Theory and Economic History of the University of Granada.. [Downloadable!]
Anna Carabelli & Nicolò De vecchi, 2004. "On Hayek and Keynes once again: a reply to Butos & Koppl," Review of Political Economy, Taylor and Francis Journals, vol. 16(2), pages 249-256, April. [Downloadable!] (restricted)

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