The recent Great Financial crisis has restated the menace of deep depressions among the current economic challenges while the livelihoods turned out to be subordinated to speculation, financial instability and the bailout of domestic financial systems. Looking backward, in the context of the 1930 Great Depression, John Maynard Keynes pointed out that the evolution of capital markets increases the risk of speculation and instability since these markets are mostly based upon conventions whose precariousness affects the rhythm of investment and increases pressures on the political sphere.
Keynes called attention to the fact that the capitalist system has endogenous mechanisms capable of destabilizing the levels of spending, income and employment. At the heart of his theory, he suggested a reconsideration of the understanding of the relations among individuals, society and governments within the markets where institutions and conventions could shape human behavior. Aware of the need to overcome the concept of rationality that overwhelms the Homo economicus, his contribution enhances a more extended understanding of entrepreneurs’ decisions or, more in general, firms’ decisions. Besides, his approach enhanced a more fruitful apprehension of the real-world where the outcomes of firms’ decisions are not submitted to stochastic behavior, that is to say, they are not predictable.
As a matter of fact, firms’ decisions are based on conventions. As uncertainty is inherent to the capitalist decision making process, Keynes relied on the concepts of credibility and degree of confidence on a conventional judgment, that is historically built within the markets, to promote changes in the international economy. In his attempt to re-shape the world order in the 1940s, Keynes pointed out the need of a “wide measure of agreement”, that is to say, the need to create new conventions based on trust. Indeed, trust turns out to be a conventional concept related to the level of confidence built in a society around the future business environment, that is to say, around the legal, regulatory, macroeconomic and political setting that would impact the evolution of the markets. Under his perspective, trust has a historical and social nature. Indeed, trust deeply impacts economic and social development. It’s high time for explicitly introducing this discussion in the economics curriculum.