General theorising and historical specificity: Hodgson on Keynes

Abstract

In relation to Keynes's thought on general theorising, consumption theory and institutions, this paper closely examines Geoff Hodgson's views as set out in his magisterial work, How Economics Forgot History. While in full agreement with its advocacy of the institutionalist programme, it finds that Keynes's position has been misunderstood in all three areas, and that deep compatibilities exist between the General Theory and institutionalist analysis. Using all his available writings, it is argued that Keynes's conception of a general theory is very different from that underpinning neoclassical economics so that criticisms of the latter are irrelevant to the former, that Keynes's ‘fundamental psychological law’ was never advanced as a universal law applicable to all economies, and that Keynes expressly analysed a historically specific economic institution and its assemblage of sub-institutions. Keynes is an ally, not an enemy, of institutionalism in pursuing better economic theory.

Keynes and the historical specificity of institutions: a response to Rod O'Donnell

“…I wish to stress some of our many areas of agreement. For example, O'Donnell (2018: 1) wrote in his abstract that ‘deep compatibilities exist between the General Theory and institutionalist analysis … Keynes’ conception of a general theory is very different from that underpinning neoclassical economics’, and ‘Keynes is an ally, not an enemy, of institutionalism’. My agreement with this is affirmed here and now, just in case the reader might possibly get the impression that I have expressed disagreement with these sentiments.…”

“…I have frequently stressed the links and affinities between Keynes and parts of the original institutional economics (Hodgson, 1989; 1999; 2004: 207, 285, 309–315, 385–386). O'Donnell (2018: 2) also wrote of Keynes ‘it is erroneous to lump his thought in with neoclassical economics’. Again, I agree, and I make no such conflation.…”

“…Sometimes O'Donnell skips the X and goes straight to the Y . Consider, for example, section 6 of his paper on ‘Keynes and institutions’, which begins as follows: ‘Although Keynes did not theorise in the general manner of institutionalist economists, he was nevertheless fully cognisant of, and engaged with, institutions throughout his entire career.’ In the General Theory , ‘institutions play explicit and essential roles, theoretically and practically’ (O'Donnell, 2018: 14).…”

General Theorizing and Historical Specificity in the ‘Keynes Versus the Classics’ Dispute

“…In their stimulating recent contributions, Hodgson ( 2019 ) and O’Donnell ( 2019a , b ) discuss the issues of general theorizing and historical specificity, in the ‘Keynes versus the Classics’ dispute. Two limitations of their analysis emerge.…”

“… 2 O’ Donnell opposes the standard MTM (multiple-theory model) approach consisting of three different stages (axioms, extra assumptions and particular cases) to Keynes’s OTM (one theory model), which he correctly characterizes as a ‘one-stage’ approach: ‘[it] has several senses in which it can express its generality, all are internal to the model and do not require external assistance of any kind’ ( 2019a , p. 718, emphasis in the text). Based on this, I label Keynes’s approach as ‘internalist’.…”