> High Keynesianism: Weirdness about how attempts to pierce the veil of
> time and ignorance involve not risk but Knightian uncertainty, and
> about how the theory of aggregate demand needs to be connected with
> Sraffian insights into the pricing of commodities produced by means
> of commodities. I have some High Keynesian leanings myself (the first
> branch, not the second branch), although I prefer to express them in
> the Shleifer-Vishny "limits to arbitrage" and "inefficient markets"
> language, rather than in the Davidsonian language that I have a hard
> time understanding.
For what are ultimately ontologically based epistemological reasons, Keynes claimed that the long run economic future is often unknowable so that where the most important consequences of present decisions will be long run - as in decisions concerning the accumulation of wealth - decisions frequently cannot rationally be based on forecasting consequences.
This idea of "uncertainty" looks weird to the kind of personality psychologically unable to face such uncertainty. This is a personality lacking the ego maturity and strength required for what Keats called "negative capability." Such a personality will be characterized by unmastered persecutory anxiety and will defend itself against this by, among other things, denying facts that provoke it. Keynes's kind of uncertainty is one such fact. This personality will also be dominated by greed.
Keynes makes the domination of economic life by personalities of this kind the "essential characteristic of capitalism."
This essential psychological aspect of Keynes's theory is confirmed in various ways by contemporary economics.
Thus orthodox economic theory implicitly denies the existence of Keynes's kind of uncertainty (one sign of this being its inability to comprehend this aspect of Keynes). As Mirowski's recent book - Machine Dreams - documents (see e.g. pp 424-6), the architects of this orthodoxy were personalities of the kind posited by Keynes, Nash being an obvious example. This will also explain, by the way, their mistaken identification of "reason" with formal logic.
Davidson and Minsky allow for Keynes's kind of uncertainty, but ignore the psychological aspect of his theory. Both retain the orthodox idea of "rational choice," but amend it to include the premise that "agents" know when the future is uncertain and deal with this "rationally."
"In this [Post Keynesian] modeling maximizing behavior remains important but the maximizing behavior of critical importance takes the form of present decisions that the Ms [in M-C-M'] over time will exceed M with an ample margin of safety. The appropriate construct to use in modeling such relations is the family of short- and long-term cost curves.
"The maximizing decisions that lead to M [to] C action (financing M of spending on C of investment output) cannot be divorced from uncertainty." (Minsky, "The Essential Characteristics of Post Keynesian Economics" in Deleplace and Nell *Money in Motion* pp. 77-8)
In Davidson this is associated with the self-contradictory claim that agents can deal rationally with long run uncertainty in Keynes's sense by holding money, an argument that assumes agents can know the long run consequences of holding money. In Keynes, in contrast, holding money can serve as another irrational psychological defense against the anxiety associated with uncertainty.
Keynes's psychological ideas can be linked to Marx by treating them as an elaboration of "egoistic man" understood as a personality dominated by clinical narcissism.
Ted