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Keynes and ‘Psychology’

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  • J. E. King

Abstract

Keynes’ views on expectations, rationality and business decision making have often been misunderstood, most recently by George Akerlof and Robert Shiller in their book, Animal Spirits. In this paper I discuss the role of “psychology” in Keynes’ economic writings, with particular reference to the General Theory. I outline the nature and significance of their misinterpretation in Section 1. Then, in Section 2, I summarise the literature on Keynes, Bloomsbury and Freudian psychology. I argue that it makes far too much of a very tenuous connection between the Cambridge economist and the Viennese psychologist, and cite the (very limited) evidence concerning Freud’s influence on Keynes. In Section 3, I conduct a detailed textual analysis of the use of “psychological”, and related terms, in the General Theory. In Section 4, I extend the discussion to Keynes’ entire Collected Works, before and after 1936. I conclude, in Section 5, that Keynes’ use of “psychology” is unsystematic and confusing, and should have been avoided.

Suggested Citation

  • J. E. King, 2010. "Keynes and ‘Psychology’," Economic Papers, The Economic Society of Australia, vol. 29(1), pages 1-12, March.
    • Handle: RePEc:bla:econpa:v:29:y:2010:i:1:p:1-12
    DOI: 10.1111/j.1759-3441.2010.00053.x
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    References listed on IDEAS

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    1. Gillies Dostaler, 2007. "Keynes and his Battles," Books, Edward Elgar Publishing, number 1404, March.
    2. Winslow, E G, 1989. "Organic Interdependence, Uncertainty and Economic Analysis," Economic Journal, Royal Economic Society, vol. 99(398), pages 1173-1182, December.
    3. Piero V. Mini, 1994. "John Maynard Keynes," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-23606-0, February.
    4. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
    5. Ian McDonald, 2009. "Behavioural macroeconomics and wage and price setting: Developing some early insights of John Maynard Keynes and Joan Robinson," CAMA Working Papers 2009-11, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    6. E. G. Winslow, 1986. ""Human Logic" and Keynes's Economics," Eastern Economic Journal, Eastern Economic Association, vol. 12(4), pages 413-430, Oct-Dec.
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