>> Keynes wasn't an "economist" in the contemporary sense. He didn't take the
>> "economic approach"...
>
> ????
>
> Then why would he write: "I find myself moved... to remind
> contemporary economists that the classical teaching embodied some
> permanent truths of great significance.... There are in thse matters
> deep undercurrents at work, natural forces, one may call them, even
> the invisible hand, which are operating towards equilibrium..." ?
>
Well it can't be because he embraced the "economic approach", can it Brad? That interpretive hypothesis is explicitly contradicted by all the passages I quoted and by an overwhelming amount of other textual evidence some of which I'll point to below.
Let's see if we can find an answer consistent with the passages I quoted and you ignored.
The following can also be found in the context from which the passage you quote is taken.
"The United States is becoming a high-living, high-cost country beyond any previous experience. Unless their internal, as well as their external, economic life is to become paralysed by the Midas touch, they will discover ways of life which, compared to the ways of the less fortunate regions of the world, must tend towards, and not away from, external equilibrium" (vol. XXVII, p. 444)
"No one can be certain of anything in this age of flux and change. Decaying standards of life at a time when our command over the production of material satisfactions is the greatest ever, and a diminishing scope for individual decision and choice at a time when more than before we should be able to afford these satisfactions, are sufficient to indicate an underlying contradiction in every department of our economy. No plans will work for certain in such an epoch. But if they palpably fail, then, of course, we and everyone else will try something different.
"Meanwhile for us the best policy is to act on the optimistic hypothesis until it has been proved wrong. We shall do well not to fear the future too much. Preserving all due caution in our own activities, the job for us is to get through the next five years in conditions which are favourable and not unfavourable to the restoration of our full productive efficiency and strength of purpose, of our prestige with others and of our confidence in ourselves. We shall run more risk of jeopardising the future if we are influenced by indefinite fears based on trying to look ahead further than any one can." (pp. 445-6)
What you need to do to answer your question is:
(a) make what you've quoted consistent with the idea that "their [i.e. the U.S.'s] internal, as well as their external, economic life" could become "paralysed by the Midas touch".
When you've done this you'll be well on the way to an answer because the understanding of "the psychological attitude to liquidity" at which you'll have arrived will also enable you to understand the "deep undercurrents" which, for Keynes and (in a sense of "classical" that passes you by) to some degree for "classical" economists as well, are "psychological" in the sense of irrational. Understood in this way they are "the invisible hand" of "the cunning of reason" working through irrational "passions".
These psychological "deep undercurrents" are the "natural forces" tending to make the U.S. into a "high-living, high-cost country".
Here are some additional passages relevant to determining the meaning of "paralysed by the Midas touch".
pp. 447-50 in "My Early Beliefs" (vol. X)
There, having just included himself among those who were "amongst the first of our generation, perhaps alone amongst our generation, to escape from the Benthamite tradition" (p. 445), Keynes claims that:
"the view that human nature is reasonable" was "an a priori view of what human nature is like, both other people's and own own, which was disastrously mistaken" (p. 447)
and substitutes for it the view that there are:
"insane and irrational springs of wickedness in most men." (p. 447)
"My Early Beliefs" is, as I'm sure you know, one of two essays which Keynes explicitly instructed in his will should be published after his death, presumably to provide sophisticated practitioners of hermeneutics like you with evidence that would show incontrovertibly that he assumed both that "human nature is reasonable" and that the Benthamite conception of "reasonable" is true.
"the essential characteristic of capitalism" is "the dependence upon an intense appeal to the money-making and money-loving instincts of individuals as the main motive force of the economic machine." (vol. IX, p. 293)
"the love of money as a possession" is "a disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease." (vol. IX, p. 329)
"partly on reasonable and partly on instinctive grounds, our desire to hold money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future. Even though this feeling about money is itself conventional or instinctive, it operates, so to speak, at a deeper level of our motivation. It takes charge at the moments when the higher, more precarious conventions have weakened. The possession of actual money lulls our disquietude; and the premium which we require to make us part with money is the measure of the degree of our disquietude." (vol. XIV, p. 116) [here you'll want to pay particularly close attention to the contrasting of "instinctive" - as in "the money-making and money-loving instincts" and the "hoarding instinct" - with "reasonable" and to the treatment of the "feeling about money" as "itself conventional or instinctive" and as operating "at a deeper level of our motivation" etc. i.e. as a "deep undercurrent"]
"The sage [Solon] who first debased the currency for the social good of the citizens was suitably selected by legend to admonish Croesus of the vanity of hoarded riches. Solon represents the genius of Europe, as permanently as Midas depicts the bullionist propensities of Asia." p. 227
"The history of India at all times has provided an example of a country impoverished by a preference for liquidity amounting to so strong a passion that even an enormous and chronic influx of the precious metals has been insufficient to bring down the rate of interest to a level which was compatible with the growth of real wealth." (GT, p. 337)
"France is the last home of the bullionist complex and of ultra-conservatism in all matters concerning cash." (XXI, p. 231)
"What we all overlooked was the psychological effect of a rise in the rupee price of gold on the minds of the tens of millions of Indians who are in possession of hoarded gold. For when it was discovered that gold could be sold for rupees at a profit in terms of rupees over the price at which it had been bought, there occurred a great and extraordinary event in the monetary history of the world - the tide of gold which had flowed from west to east for hundreds of years was suddenly reversed. Zemindars and peasants over the length and breadth of India began to sell their gold. ...
"Now this gold is sold forward against sterling, as soon as it is purchased, to one or other of the gold countries, mostly to France. The sterling thus obtained is paid over to the Government of India, in exchange for rupees, and used by them to replenish their sterling balances and to repay their dangerously excessive short-term sterling debt. Thus the equivalent in India's sales of gold is added immediately to the liquid resources of the London market; though a few months may elapse between the Indian zemindar bringing his ornaments to the touch-stone (still literally employed) of his up-country banker, and the arrival of defaced, refined and barren metal at its ultimate destination in the vaults of the Bank of France.
"The Indian farmer and the African miner need only a little time to achieve the inevitable conclusion. The day must come, and not too far off, when our modern Midases will be filled to the teeth and choking. And that, perhaps, will be the moment which the irony of heaven will choose for granting to our chemists the final solution of the problem of manufacturing gold, and of reducing its value to that of a base metal.
Witness the famous tale that Ovid told.
Midas the king, as in his book appears,
By Phoebus was endowed with asses' ears." (vol. XXI, pp. 71-72)
(b) starting from the second passage, work out what, for Keynes, constitutes "rationality"
The passage points to true uncertainty, i.e. to the fact that in many circumstances requiring decision ""we do not know what the future will bring, except that it will be quite different from anything we could predict." (Keynes, as quoted by Skidelsky, vol. 3, p. 33)
This excludes rational use of any "calculative" form of rationality, including the Benthamite form you're attributing to him.
"About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know."
As the passage indicates, Keynes claims the rational response to the fact of true uncertainty is (a) consciously to acknowledge its existence and (b) within the limits created by the rational "optimistic hypothesis", "to allow caprice to determine us" (VIII, p. 32; see also XXIX, 288-94).
He also assumes, however, that the "vast majority" don't respond rationally. They "fear the future too much" and, for this reason, deny the fact of true uncertainty.
"We do not know what the future holds. Nevertheless, as living and moving beings, we are forced to act. Peace and comfort of mind require that we should hide from ourselves how little we foresee. Yet we must be guided by some hypothesis. We tend, therefore, to substitute for the knowledge which unattainable certain conventions, the chief of which is to assume, contrary to all likelihood, that the future will resemble the past." (XIV, p. 124)
He then proceeds explicitly to reject the "economic approach" you attribute to him as a "pseudo-rationalistic notion". The "Benthamite calculus" is one of the "classical doctrines" "we cannot now accept".
"This [hiding from ourselves how little we foresee] is how we act in practice. Though it was, I think, an ingredient in the complacency of the nineteenth century that, in their philosophical reflections on human behaviour, they accepted an extraordinary contraption of the Benthamite School, by which all possible consequences of alternative courses of action were supposed to have attached to them, first a number expressing their comparative advantage, and secondly another number expressing the probability of their following from the course of action in question; so that multiplying together the numbers attached to all the possible consequences of a given action and adding the results, we could discover what to do. In this way a mythical system of probable knowledge was employed to reduce the future to the same calculable status as the present. No one has ever acted on this theory. But even today I believe that our thought is sometimes influence by some such pseudo-rationalistic notions." (XIV, p. 124)
This is repeated elsewhere. For instance:
"The orthodox theory assumes that we have a knowledge of the future quite different form that which we actually possess. This false rationalisation follows the lines of the Benthamite calculus. The hypothesis of a calculable future leads to a wrong interpretation of the of the principles of behaviour which the need for action compels us to adopt, and to an under-estimation of the concealed factors of utter doubt, precariousness, hope and fear." (XIV, p. 122)
He claims in fact that the "economic approach" is a neurotic symptom. It's itself one of those "pretty, polite techniques, made for a well-panelled board room and a nicely regulated market" by means of which, to avoid anxiety, "we hide from ourselves how little we foresee":
"the theory we devise in the study of how we behave in the market place should not itself submit to market-place idols. I accuse the classical economic theory of being itself one of these pretty, polite techniques which tries to deal with the present by abstracting from the fact that we know very little about the future." (XIV, p. 115)
These "higher, more precarious" techniques are, however, "always liable to collapse".
"At all times the vague panic fears and equally vague and unreasoned hopes are not really lulled, and lie but a little way below the surface." [above the "deep undercurrents"]
Addiction to the "economic approach" is an expression of obsessional "control", one of the key features of the "manic defences" against persecutory and depressive anxiety.
> Keynes was a more subtle and complicated thinker than you recognize...
Another key feature of the "manic defences" is "contempt".
Ted -- Ted Winslow E-MAIL: WINSLOW at YORKU.CA Division of Social Science VOICE: (416) 736-5054 York University FAX: (416) 736-5615 4700 Keele St. Toronto, Ontario CANADA M3J 1P3