Tom wrote:
> It's not an assumption in this discussion that any
> element of individual irrationality in economic life
> must be a rare exception, confined to the
> "psychopathic," is it?
It's not my assumption. I pointed to the psychoanalytic theory of greed as an expression of psychopathology as the most likely psychology underpinning Keynes's claims that "the essential characteristic of capitalism ... is the dependence on an intense appeal to the money-making and money-loving instincts of individuals as the main motive force of the economic machine" and that "the love of money as a possession - as distinguished from the love of money as a means to the enjoyments and realities of life - ... [is] a somewhat disgusting morbidity, one of those semi criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease."
"Psychopatholgy" in this context refers to a continuum of kinds and degrees of irrational psychology from the psychotic to the neurotic to "the psychopathology of everyday life."
The identification of what I attributed to Keynes with the claim that "Warren Buffett and Bill Gates are psychopaths" is mistaken. Buffett is one of the few readers of Keynes able to perceive that Keynes's analysis of financial markets attributes significant irrational psychology to the "vast majority" of market participants. As Keynes puts it,
"the vast majority of those who are concerned with the buying and selling of securities know almost nothing whatever about what they are doing. They do not possess even the rudiments of what is required for a valid judgment, and are the prey of hopes and fears easily aroused by transient events and as easily dispelled. This is one of the odd characteristics of the capitalist system under which we live, which, when we are dealing with the real world, is not to be overlooked." (Collected Writings, vol. VI, p. 323)
Buffett is also insightful about other aspects of Keynes's approach to investment. See, for instance, his comments on Keynes's treatment of the "equity premium" at <http://www.ibmemployee.com/PDFs/WarrenBuffettStockMarket.pdf>
Ted