The Nature of Macroeconomics

The Nature of Macroeconomics

Instability and Change in the Capitalist System

Athol Fitzgibbons

This book addresses the long absence of a satisfactory theory of macroeconomics. Keynesian theory is not consistent with rational self-interest, but neo-classical economics is unable to explain economic volatility and the trade cycle. Athol Fitzgibbons critiques the leading macroeconomic theories, which he believes are unduly mechanistic because they are incompatible with non-quantitative knowledge.

Chapter 6: Keynes and the Intellectual Context

Athol Fitzgibbons

Subjects: economics and finance, post-keynesian economics


For methodological reasons, economics only recognizes perfect knowledge and zero knowledge, yet macroeconomic phenomena are caused by reactions to non-quantitative knowledge. Why should anyone bother to deny what is so obviously before their eyes every day? Why should a simple and obvious proposition, namely that the character of economic behaviour will be influenced by its environment, meet such resistance from a long succession of the most deservedly prominent economists? The answer is partly because the assumptions economists make about knowledge have become as permeant and invisible as the air that they breathe. But this was not always so; at the very outset of the modern era, somewhat more than two hundred years ago, the new philosophy had to justify its strong opposition to judgement and non-quantitativeknowledge. The Greek and Christian world-view had been that society was a complex whole, directed towards a moral end. Social science was declared to be impossible, economic considerations were of secondary significance, and politics were supposed to be guided by moral notions that reflected higher values. The ideal society was to be guided by an elite endowed with virtues that included intellectual intuition. The methodological tradition in pre-Enlightenment Western thought was that two modes of reason, the practical and the scientific, were needed to understand phenomena of two different kinds. In the words of Aristotle, the soul could grasp a rational principle in one of two ways: ... one by which we contemplate the kind of things whose originative 123 124 Ecorioniics a i Practical Reason...

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