ABSTRACT
This chapter focuses on the third basic feature of Keynes’s approach: namely, his ‘indirect forces’ paradigm. This paradigm is in contrast with Hicks, who accepts the ‘direct forces’ view, implying that prices have a direct adjusting role. It should be clear that this contrast arises not because Keynes rules out competition or price flexibility, which, indeed, also play a role in the General Theory. The true reason is that for Keynes neither competition nor price mechanism works as in general equilibrium analysis, due to the fact that, in his view, agents’ self-interest is not the only force that underlies the relations between individuals. Its influence is mediated by a social dimension: in fact, in order to pursue their self-interest agents need to coordinate their efforts with those of others; that is to say, to exercise Smithian ‘sympathy’ or ‘fellow feeling’ towards other persons. As I have pointed out, Keynes’s contribution is to introduce this theme (which seems to be only of philosophical or sociological value in Smith) to economic analysis. Let us now see how it affects the working of the price mechanism and the notion of equilibrium. Once again the analogy between Keynes and Einstein is most instructive.
