High pressure and black clouds: Keynes and the frequentist theory of probability
Address for correspondence: Professor Alberto Baccini, Dip. di Economia Politica, Università di Siena, via P. A. Mattioli, 10, 53100 Siena, Italy; email baccini{at}unisi.it
The thesis of this paper is that Keynes wrote A Treatise on Probability in opposition to the frequentist theory of probability, systematised by John Venn, which denied any role for probability in decision theory. Keynes was interested in finding an alternative conception of probability that could be utilised as a guide of life. To analyse this point, the paper considers Keynes's criticisms of frequentist tradition in the two versions of his Fellowship dissertation, and in the published edition of his Treatise. Keynes's project is then illustrated with the famous example of whether or not to go out with one's umbrella in the situation in which the pressure is high and the clouds are black.
Key Words: John Maynard Keynes • John Venn • Probability • Decision theory
JEL classifications: B31, B41, D81
Manuscript received September 10, 2001; final version received May 13, 2002.