From Edward Fullbrook Scientific education entails taming the authority of one’s intuition. Responsible citizenship in a democracy may entail it as well. Keynes argued that markets often create inaccurate expectations of economic reality which people then act upon thereby changing reality. This reflexivity that Keynes identified as central to capitalist markets is the opposite of the basic process described by traditional economic theory, both in Keynes’ day and in our own, whereby it is assumed that market expectations are determined by market reality rather than one of that reality’s determinants. For most people Keynes’ theory of market expectations, like his theory of aggregate demand, is counterintuitive, and therefore difficult to elucidate and popularize sufficiently to
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from Edward Fullbrook
Scientific education entails taming the authority of one’s intuition. Responsible citizenship in a democracy may entail it as well.
Keynes argued that markets often create inaccurate expectations of economic reality which people then act upon thereby changing reality. This reflexivity that Keynes identified as central to capitalist markets is the opposite of the basic process described by traditional economic theory, both in Keynes’ day and in our own, whereby it is assumed that market expectations are determined by market reality rather than one of that reality’s determinants.
For most people Keynes’ theory of market expectations, like his theory of aggregate demand, is counterintuitive, and therefore difficult to elucidate and popularize sufficiently to become part of public discussion. That is why George Soros’s role as a populariser of Keynes’ theory of expectations is potentially significant. It is my view that in democratic societies the ultimate obstacle to implementing and maintaining laws and policies that will make their economies function reasonably well and fairly is the challenge of intellectually enabling their populations, especially their pundits and politicians, to comprehend the counterintuitive dimensions of economic reality. Without that comprehension democratic societies will always be highly vulnerable to accepting the advice that follows from economic reasoning that excludes counterintuitive propositions and that serves the interests of tiny but powerful minorities.