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Rethinking ExpectationsThe Way Forward for Macroeconomics$
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Roman Frydman and Edmund S. Phelps

Print publication date: 2013

Print ISBN-13: 9780691155234

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691155234.001.0001

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Keynes on Knowledge, Expectations, and Rationality

Keynes on Knowledge, Expectations, and Rationality

(p.112) Chapter Three Keynes on Knowledge, Expectations, and Rationality
Rethinking Expectations

Sheila Dow

Princeton University Press

This chapter examines John Maynard Keynes' views on knowledge, expectations, and rationality. It focuses not only on Keynes' ideas on expectation formation but also on the degree of confidence attached to those expectations (i.e., uncertainty) and what this means for macroeconomic theory. After providing a synthetic account of Keynes' ideas on knowledge and expectations, along with his understanding of the source of uncertainty, the chapter considers his emphasis on the role of conventional judgment, and of conventions more generally, as well as the implications of these ideas for how we may understand and use the concept of rationality in a Keynesian framework, alongside considerations of logic and consistency. Keynes' concern with the interplay between individuality and sociality sheds some light on Keynes in relation to the formulation of microfoundations. The chapter concludes with a discussion of the implications of Keynes' ideas on knowledge, expectations, and rationality for economic methodology.

Keywords:   knowledge, John Maynard Keynes, expectations, rationality, expectation formation, macroeconomic theory, uncertainty, individuality, sociality, microfoundations

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