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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.

Suggested Citation

  • Anna M. Carabelli & Mario A. Cedrini, 2011. "Chapter 18 of the General Theory “Further Analysed”: The Theory of Economics as A Method," Working Papers 128, SEMEQ Department - Faculty of Economics - University of Eastern Piedmont.
  • Handle: RePEc:upo:upopwp:128
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    Cited by:

    1. Mario A. Cedrini & Roberto Marchionatti, 2017. "On the Theoretical and Practical Relevance of the Concept of Gift to the Development of a Non-imperialist Economics," Review of Radical Political Economics, Union for Radical Political Economics, vol. 49(4), pages 633-649, December.
    2. Anna M. Carabelli & Mario A. Cedrini, 2014. "Keynes's General Theory , Treatise on Money and Tract on Monetary Reform : different theories, same methodological approach?," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 21(6), pages 1060-1084, December.
    3. Anna Carabelli, 2012. "A new methodological approach to economic theory: what I have learnt from 30 years of research on Keynes," Chapters, in: Jesper Jespersen & Mogens Ove Madsen (ed.), Keynes’s General Theory for Today, chapter 5, pages 79-97, Edward Elgar Publishing.
    4. Carabelli, Anna & Cedrini, Mario, 2013. "A Methodological Reading of "The Economic Consequences of the Peace"," CESMEP Working Papers 201304, University of Turin.

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    Keywords

    John Maynard Keynes; The General Theory; complexity; economic methodology;
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    JEL classification:

    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • A10 - General Economics and Teaching - - General Economics - - - General

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