Chapter 18 of the General Theory 'Further Analysed': The Theory of Economics as a Method

39 Pages Posted: 5 Apr 2011

See all articles by Anna Carabelli

Anna Carabelli

University of Piemonte Orientale

Mario A. Cedrini

University of Turin - Department of Economics S. Cognetti de Martiis

Date Written: March 31, 2011

Abstract

In 1987, Greenwald and Stiglitz accused Keynes’s summary of the "General Theory" in chapter 18 of relying upon “neoclassical and Marshallian tools.” A number of contributions have on the contrary emphasized the methodological importance of this chapter, which this paper revisits in the light of "A Treatise on Probability." It thereby shows that the notions of cause and dependence used to discuss the relationships between independent and dependent variables of the "General Theory" are related to the concept of “independence for knowledge,” which concerns logical connections between arguments rather than material connections between events. We demonstrate that such logical connections established in chapter 18 are rediscussed in chapters 19-21, where Keynes allows for probable repercussions between the factors and removes the simplifying assumptions previously introduced. After stressing the methodological continuity this method provides with the analysis of credit cycles in "A Treatise on Money," we argue that chapter 18 is an indispensable tool to decode the internal text structure of the "General Theory." We thus characterize the latter as a vademecum to the complex economic world, the author providing an analytical method allowing – and requiring – the readers to emulate his efforts to grasp the complexity and interdependence of the economic material.

Keywords: John Maynard Keynes, The General Theory, complexity, economic methodology

JEL Classification: B31, B41, A10

Suggested Citation

Carabelli, Anna and Cedrini, Mario A., Chapter 18 of the General Theory 'Further Analysed': The Theory of Economics as a Method (March 31, 2011). Available at SSRN: https://ssrn.com/abstract=1802583 or http://dx.doi.org/10.2139/ssrn.1802583

Anna Carabelli

University of Piemonte Orientale ( email )

Rectory, via Duomo
Novara, Novara 6-13100
Italy

Mario A. Cedrini (Contact Author)

University of Turin - Department of Economics S. Cognetti de Martiis ( email )

Campus Luigi Einaudi - Lungo Dora Siena 100
Torino, 10153
Italy
+390116704975 (Phone)
+390116703895 (Fax)

HOME PAGE: http://www.unito.it/unitoWAR/page/dipartimenti4/D031/D031_personale_batch_BasicBook_Docenti_IT7?id=4

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