Against Rigid Rules – Keynes’s View on Monetary Policy and Economic Theory

  • Elke Muchlinski
Part of the The European Heritage in Economics and the Social Sciences book series (EHES, volume 11)


The focus of my paper is to explain why Keynes’s economic theory is not compatible with rigid principles by sketching his view on “rules” in monetary policy and international monetary relations. Any reference to formal aestheticism or rigidly defined rules seems to imply an inadequate interpretation of his work. Keynes’s objections to formal aestheticism trace back to his view that economics is a moral science or soft science, respectively. Economic theory lacks fundamental presumptions which are indeed necessary to construct a hard science.


Monetary Policy Central Bank Rational Belief Textual Evidence Contemporary World 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Baert P (1996) Realist philosophy of the social sciences and economics: a critique. Cambridge Journal of Economics 20:513–522Google Scholar
  2. Bateman B (1991) Das Maynard problem. Cambridge Journal of Economics 18:101–111Google Scholar
  3. Bernanke BS (2004) The logic of monetary policy. Washington, DC. date 15.12.2007
  4. Blinder AS (1987) Keynes, Lucas, and scientific progress. The American Economic Review 77:130–136Google Scholar
  5. Blinder AS (1998) Central banking in theory and practice. MIT Press, CambridgeGoogle Scholar
  6. Blinder AS (1999) Central bank credibility: why do we care? How do we build it? NBER, Working Paper No. 7161. MIT Press, CambridgeGoogle Scholar
  7. Blinder AS (2005) What have we learnt since October 1979? CEPS Working Paper No. 105. Princeton University Press, PrincetonGoogle Scholar
  8. Blinder AS, Ehrmann M, Fratzscher M, De Haan J, David JJ (2008) Central bank communication and monetary policy: a survey of theory and evidence. Journal of Economic Literature 46(4):910–945CrossRefGoogle Scholar
  9. Bordo M, Eichengreen B (2009) Bretton Woods and the great inflation. In: Bordo MD, Orphanides A (eds) The great inflation. University Press of Chicago, ChicagoGoogle Scholar
  10. Boughton JM (2002) Why White, not Keynes? Inventing the Postwar International Monetary System. IMF Working Paper, WP/02/52. Washington, DC.
  11. Carabelli A (1988) On Keynes’s method. Macmillan, LondonGoogle Scholar
  12. Carabelli A (1991) The methodology of the critique of the classical theory: Keynes on organic interdependence. In: Bateman B, Davis JB (eds) Keynes and philosophy. Essays on the origin of Keynes’s thought. Edward Elgar, London, pp 104–125Google Scholar
  13. Chalmers AF (2006) What is this thing called science? Open University Press, MaidenheadGoogle Scholar
  14. D’Autume A, Caterlier J (1997) Is economics becoming a hard science? Edward Elgar, CheltenhamGoogle Scholar
  15. Davis JB (1994) Keynes’s philosophical development. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  16. Dostaler G (1994) Keynes et Bretton Woods. De l’ Ordre des Nations à l’ Ordre des Marchés. Bretton Woods, Cinquante ans Plus Tard. In: Interventions économicques. Pur uns Alternativ Sociale, No 26. Québec, pp. 53–78, Une collection développée en collaboration avec la Bibliothèque Paul Émile-Boulet de l’ Université du Québec à Chicoutimi.
  17. Dostaler G (2005) Keynes et ses Combats. Albin Michel, ParisGoogle Scholar
  18. Duménil G, Lévy D (1997) Should economics be a hard science? In: D’Autume A, Cartelier J Edward Elgar, Cheltenham. pp 276–303Google Scholar
  19. Eichengreen B (1995) Central bank cooperation and exchange rate commitments: the classical and the interwar goldstandards compared. Financial History Review 2:99–117CrossRefGoogle Scholar
  20. European Central Bank (2001) Issues related to Monetary policy rules. Monthly Report October, Frankfurt am Main, pp 37–50Google Scholar
  21. Fitzgibbons A (1998) Against Keynes’ recantation. Cahiers D’Économie Politique. Histoire de la Pensée et Théories 30–31(L’Harmattan):147–165Google Scholar
  22. Hillard J (1992) Keynes, orthodoxy and uncertainty. In: Gerrard B, Hillard J (eds) The philosophy and economics of J. M. Keynes. Edward Elgar, London, pp 59–79Google Scholar
  23. Horsefield KJ (1969) The International Monetary Fund 1945–1965. Twenty years of international monetary cooperation. Volume III: documents. International Monetary Fund, Washington, DCGoogle Scholar
  24. Issing O (1996) Regeln versus Diskretion in der Geldpolitik. In: Bofinger P, Ketterer K-H (eds) Neuere Entwicklungen in der Geldtheorie und Geldpolitik. J. C. B. Mohr, Tübingen, pp 3–20Google Scholar
  25. Issing O (1999) The eurosystem: transparent and accountable or ‘Willem in Euroland’. Journal of Common Market Studies 37(3):503–519CrossRefGoogle Scholar
  26. Issing O (2005a) Communication, transparency, accountability: monetary policy in the twenty-first century. The Federal Reserve Bank of St Louis Review 87(pt 1):65–83Google Scholar
  27. Issing O (2005b) Monetary policy in an uncharted territory. In: Issing O, Gaspar V et al (eds) Imperfect knowledge and monetary policy. The stone lectures in economics. Cambridge University Press, Cambridge, pp 12–76Google Scholar
  28. Issing O (2009) In search of monetary stability: the evolution of monetary policy. BIS Working Paper No 273, Bank for International Settlements (BIS).
  29. Issing O (2011) Lessons for monetary policy: what should the consensus be? IMF Working Paper WP/11/97, Research Department.
  30. Kant I (1781/1965) Critique of Pure Reason. Translated by Norman Kemp Smith (unabridged ed.) New York: St. Martin’s PressGoogle Scholar
  31. Keynes JM (1904) Ethics in relation to conduct. Keynes Papers, MSS, King’s College, CambridgeGoogle Scholar
  32. Keynes JM (1906) Egoism. Keynes Papers, MSS, King’s College, CambridgeGoogle Scholar
  33. Keynes JM (1973–1989) The collected writings (C.W.) of Maynard Keynes, vols I–XXIX. In: Moggridge DE, Johnson E (eds). Macmillan, LondonGoogle Scholar
  34. King M (1997) Changes in UK monetary policy: rules and discretion in practice. Journal of Monetary Economics 39:81–97CrossRefGoogle Scholar
  35. Kirman AP (1992) Whom or what does the representative individual represent? The Journal of Economic Perspectives 6(2):117–136Google Scholar
  36. Kosko B (1993) Fuzzy thinking. Hyperion, New YorkGoogle Scholar
  37. Levi E (1948/1967) An introduction to legal reasoning. University of Chicago Press, ChicagoGoogle Scholar
  38. Lindsey DE, Lindsey DE, Orphanides A, Rasche RH (2005) The reform of October 1979: how it happened and why. Federal Reserve Bank of St Louis Review 87(2, pt 2):187–235Google Scholar
  39. McKinnon RI (1993) The rules of the game: international money in historical perspective. Journal of Economic Literature XXXI:1–44Google Scholar
  40. Mishkin F (2009) Will monetary policy become more of a science? In: Bundesbank D (ed) Monetary policy over fifty years. Experiences and lessons. Routledge, London, pp 81–107Google Scholar
  41. Moggridge DE (1986) Keynes and the international monetary system 1909–46. In: Cohen JS, Harcourt GC (eds) International monetary problems and supply-side-economics. Macmillan, London, pp 56–83Google Scholar
  42. Moggridge DE (1992) Maynard Keynes. An economist’s biography. Routledge, LondonGoogle Scholar
  43. Moggridge DE (2002) Rescuing Keynes from the economists? The Skidelsky trilogy. Economic History of Economic Thought 9(1):111–123CrossRefGoogle Scholar
  44. Moggridge DE, Howson S (1974) Keynes on monetary policy, 1910–1946. Oxford Economic Papers, New Series 26:226–247Google Scholar
  45. Muchlinski E (1996) Keynes als Philosoph. Duncker & Humblot, BerlinGoogle Scholar
  46. Muchlinski E (1998) The philosophy of John Maynard Keynes. A reconsideration. Cahiers D’Économie Politique. Histoire de la Pensée et Théories 30–31(L’Harmattan):227–253Google Scholar
  47. Muchlinski E (1999a) The lucas critique & lucasianism – considering the history of macroeconomics. Department of Economics, Freie Universität Berlin, Nr. 1999/1. http://129.3.2041/eps/mac/papers/0503/0503019.pdf
  48. Muchlinski E (1999b) Macropolicy within a tripolar regime. Department of Economics, Freie Universität Berlin, Nr. 1999/2.
  49. Muchlinski E (2002) Transzendentaler Realismus oder Transformation der Kategorien? In: Bauer L, Hamberger K (eds) Epistemological perspectives on the social sciences. Springer, Wien, pp 215–234Google Scholar
  50. Muchlinski E (2003a) Knowledge, knowledge sharing and convention in Keynes’s thinking. In: Helmstädter E (ed) The economics of knowledge sharing. A new institutional approach. Edward Elgar, Cheltenham, pp 129–145Google Scholar
  51. Muchlinski E (2003b) Épistémologie et probabilité chez Keynes. L’ Actualité Économique Revue D’Analyse Économique 79(1–2) (HEC Montréal, Sociéte Canadienne de Science Économique):57–70Google Scholar
  52. Muchlinski E (2005) Central bank transparency: reasons for creative ambiguity. In: Hölscher J, Tomann H (eds) Globalization of capital markets and monetary policy. Houndsmills B et al. Palgrave, Macmillan, Hampsphire, pp 130–147Google Scholar
  53. Muchlinski E (2006) Was meint Wittgenstein mit ‘In der Sprache wird alles ausgetragen’?, Logos Verlag, BerlinGoogle Scholar
  54. Muchlinski E (2007a) Keynes’ a treatise on probability.
  55. Muchlinski E (2007b) Keynes against rigid rules.
  56. Muchlinski E (2011a) Central banks and Coded Language. Risks and benefits. Palgrave Macmillan, Houndmills, Basingstoke, UKGoogle Scholar
  57. Muchlinski E (2011b) Keynes’ economic theory – judgment under uncertainty. In: Cate T (ed) Keynes’ general theory seventy five years later. Edward Elgar, CheltenhamGoogle Scholar
  58. Muchlinski E (2011c) Wissen, Sprache und Bedeutung in der Ökonomik. Studien zur Entwicklung der ökonomischen Theorie Bd. 15/Reihe XXVI-Wissen/The knowledge economy. Duncker & Humblot, Berlin, pp 83–102Google Scholar
  59. O’Donnell RM (1989) Keynes: philosophy, economics and politics. The philosophical foundations of Keynes’s thought and their influence on his economics and politics. Macmillan, LondonGoogle Scholar
  60. Orphanides A, Wieland V (2008) Economic projections and rules of thumb for monetary policy. Fed Reserve Bank St. Louis Review July/August 2008 Vol. 90, No 4, pp 307–324Google Scholar
  61. Parsons C (1992) The transcendental aesthetic. In: Guyer P (ed) The Cambridge companion to KANT. Cambridge University Press, CambridgeGoogle Scholar
  62. Rorty R (1991) Inquiry as recontextualisation: an anti-dualist account of interpretation. In: Hiley DR, Bohmann JF, Shusterman R (eds) The interpretive turn. Philosophy, science, culture. Cornell University Press, Ithaca, pp 59–80Google Scholar
  63. Ryle G (1966) The concept of mind. Hutchinson, LondonGoogle Scholar
  64. Samuels WJ (1996) Postmodernism and economics: a middlebrow view. Journal of Economic Methodology 3(1):113–120CrossRefGoogle Scholar
  65. Simons HC (1936) Rules versus authorities in monetary policy. Journal of Political Economy 44:1–30CrossRefGoogle Scholar
  66. Tobin J (1983) Monetary policy: rules, targets, and shocks. Journal of Money, Credit, and Banking 15(4):506–518CrossRefGoogle Scholar
  67. Vickers J (1998) Inflation targeting in practice: the UK experience. In: Speech at the conference on implementation of price stability, CFS, Frankfurt/M, 11–12 Sept 1998Google Scholar
  68. Woodford M (2005) Central bank communication and policy effectiveness. NBER Working Paper 11898, Cambridge, December 2005Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Institute of Economic Policy and Economic HistoryFreie Universität BerlinBerlinGermany

Personalised recommendations