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The Varieties of Subjectivism: Keynes and Hayek on Expectations

Listed author(s):
  • William N. Butos

    (Trinity College)

  • Roger G. Koppl

    (Fairleigh Dickinson University)

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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  1. Hicks, J. R., 1979. "Critical Essays in Monetary Theory," OUP Catalogue, Oxford University Press, number 9780198284239.
  2. Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-595, September.
  3. Coddington, Alan, 1982. "Deficient Foresight: A Troublesome Theme in Keynesian Economics," American Economic Review, American Economic Association, vol. 72(3), pages 480-487, June.
  4. Caldwell, Bruce, 1994. "Hayek's Scientific Subjectivism," Economics and Philosophy, Cambridge University Press, vol. 10(02), pages 305-313, October.
  5. Vaughn,Karen I., 1994. "Austrian Economics in America," Cambridge Books, Cambridge University Press, number 9780521445528.
  6. Runde, Jochen, 1990. "Keynesian Uncertainty and the Weight of Arguments," Economics and Philosophy, Cambridge University Press, vol. 6(02), pages 275-292, October.
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