Re-reading Keynes after the crisis: probability and decision

The recent financial crisis has renewed the interest in Keynes's thought and his analysis of the role played by individual agents in financial markets. George Akerlof and Robert Shiller, in particular, have drawn on the growing interest in behavioural interpretations of financial markets to hold that Keynes’s insistence on “the spontaneous urge to action” of individuals is the most relevant message conveyed by the General Theory. This paper starts off from a brief summary of Akerlof and Shiller’s influential stance and aims to provide an historically motivated assessment of their claim. The paper mostly concentrates on Keynes’s Treatise on Probability and discusses how Keynes applied his philosophy of probability to decision-making. It is argued that a fresh reading of this part of Keynes’s work can contribute to an understanding of how individual agents behave under uncertainty, and that the violations of the Bayesian creed scrutinized in behavioural finance, and in some current proposals to amend mainstream decision theory, were already implicitly discussed by Keynes in his critique of frequency probability