Keynes after Ramsey: In defence of a treatise on probability

Abstract

Ramsey's critique of Keynes's ‘logical’ approach to probability is widely regarded as decisive, and his own ‘subjective’ approach and SEU framework are now familiar tools in economics. This paper challenges the standard view of Ramsey's critique and assesses the SEU model from a Keynesian viewpoint on probability. It consists of a summary of the two theories and an evaluation of Ramsey's criticisms and alternative. The two main conclusions are (i) that although Keynes yields to Ramsey on the question of the existence of logical probability relations, the formal structure of his theory is compatible with non-objectivist interpretations of probability; and (ii) that Ramsey makes far heavier demands on the capacities of the ‘rational agent’ than does Keynes.