Collective and individual rationality: Maynard Keynes' methodological standpoint and policy prescription

Some advocates of laissez-faire, including Smith and Hayek, have proposed various ‘invisible hand’ mechanisms to ensure that self-seeking behaviour at the micro-level leads spontaneously to desirable social outcomes at the macro-level. Keynes shares their holistic approach, but rejects their invisible hand mechanisms. He analyses the pathology of capitalism as rooted in a multi-player prisoners' dilemma. Keynes assigns a critical role to his own class, the ‘educated bourgeoisie’ in the reform process required to resolve that dilemma. The paper highlights the distinction and intimate connection between micro-level individualism, and the macro-level planning required to preserve it, in Keynes' policy standpoint.