ABSTRACT
The purpose of this paper is to re-assess the role of uncertainty in Keynes’s macroeconomics by exploring the concepts of probability, rational belief and rational action, as they appear in the Treatise on Probability. Three main claims are then made. First, there exist substantial links between the conception of human rationality in the Treatise on Probability and that in the General Theory. Secondly, Keynes attributes considerable importance to the rational elements involved in the process of investment decision and suggests that they normally lead to macroeconomic stability. Instability is thus explained by a specific institutional shock to an economy which is already prone to crises due to the non-perfect working of certain key markets. From this perspective, the post-Keynesian literature is misleading in blaming uncertainty for capitalist instability and unemployment. Thirdly, following Keynes’s hints, I suggest that an institutionalist research programme would provide a firm basis to model investment behaviour under uncertainty in a more realistic way than usually clone.
KEYWORDS:
Probability; rationality; Keynes