Financial conventions in Keynes's theory: the stock exchange

Abstract

This paper examines Keynes's treatment of financial conventions, focusing on the stock exchange. It shows that Keynes's approach was unclear but insightful. Some elements are combined here to clarify his implicit concept, which incorporated features of a general concept (social sharing, conformity with the conformity of others, and arbitrariness) with specific characteristics in financial contexts. The paper identifies a peculiar sense in which the speculator is unconventional. It contrasts the potentially short duration of Keynes's financial convention with the widespread idea that informal institutions change very slowly. Finally, it discusses the relation between convention, self-interest, and decision-theoretic and social norms.

Keywords:

• conventions
• institutions
• Keynes
• speculation
• stock exchange