Abstract

The article considers the possible compatibility (in epistemological and ontological terms) of the conceptions of convention and institutions in the thought of John Maynard Keynes, Thorstein Veblen and Douglass North. We argue, first, that while Veblen suggests an approach to institutions based on instincts, North sustains an approach to institutions based on rational choice, which implies distinct conceptions about institutions and the social world. We then present Keynes's ontological commitments and the epistemological implications of his ontology. We conclude that there is a background ontological compatibility between Keynes and the late North in that both accept that the socioeconomic world is fundamentally uncertain and non-ergodic; also that Keynes is epistemologically closer to North than Veblen in studying the economy as a market system embedded in social institutions; and finally that Keynes's treatment of individual action is closer to Veblen’s than North’s, in that both Keynes and Veblen see human action as based on instincts and not only on rationality.

Highlights

  • This article aims to present an analysis of Keynes’s overall worldview and theories so as to check the extent to which they can be made compatible with the works of Veblen and North and with the institutionalist tradition more generally

  • Based on the building blocks of Keynes’s ontology – fundamental uncertainty and the principle of organic unity, is there a reasonable link that one can make between Keynes and the institutionalism of Veblen and North? The natural point of entrance for our discussion are conventions, which Keynes associates with a method of making decisions in financial markets permeated by strong uncertainty

  • The stability of conventions – our “structure of interdependent judgements” – gives us the strength of collective valuations on which we base our future expectations. This interpretation brings Keynes closer to Veblen than to North concerning the ontology of individual action, both because it cannot be reduced to rationality and because the very nature of the socioeconomic world is not separated from the conceptions individuals have of it

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Summary

Introduction

This article aims to present an analysis of Keynes’s overall worldview and theories so as to check the extent to which they can be made compatible with the works of Veblen and North and with the institutionalist tradition more generally. There have been studies regarding the relation of complementarity or compatibility between Keynes and the institutional tradition – see Mouhammed (1999), Peterson (1977), Wray (2007), Thabet (2008), DesRoches and Rutherford (2008) –, no investigation has focused on the ontological and epistemological compatibility between Keynes and institutionalists. The investigation of an ontological and epistemological compatibility of the economics of Keynes and the institutional tradition can be of use for forging a theory of Keynesian Institutionalism, something that has been hinted at by Keller (1983) and sketched by Whalen (2012) after the 2008 crisis. We will compare Veblen, Keynes and North regarding individual action in the social world, concluding that their notions of efficiency, institutions and uncertainty are influenced by their underlying epistemological and ontological views

Veblen and the old institutionalism perspective
Douglass North and new institutionalism
Summary
Roots of Keynes’s thought and his modification of Marshall’s approach
Ontological and epistemological consequences of Keynes
Keynes and the institutionalism of Veblen and North: what compatibility?
Efficient Action
Institutions
Conclusion
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