Confidence and alternative Keynesian methods of asset choice
AbstractThis article elaborates the analysis of asset choice proposed by Keynes and later adopted by Post Keynesians such as Paul Davidson and Hyman Minsky. The article incorporates the essential aspects of the theory of confidence presented in Dequech (1999), first into an investigation of the relation between confidence and the liquidity premium and then into the broader theory of asset choice. Keynes considered two methods of determining planned investment expenditures: one method is based on the comparison between the marginal efficiency of capital and the interest rate; the other is based on the comparison between the demand price and the supply price of a particular capital good. Both methods can be generalized for asset choice, with investment as a particular case. The article refines and develops these two methods so as to specify more precisely the influence of confidence and speculation on the determination of liquidity premia and hence on the several assets' profitability.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Review of Political Economy.
Volume (Year): 17 (2005)
Issue (Month): 4 ()
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- David Dequech, 1999. "Expectations and Confidence under Uncertainty," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 21(3), pages 415-430, April.
- Jones, Robert A & Ostroy, Joseph M, 1984.
"Flexibility and Uncertainty,"
Review of Economic Studies,
Wiley Blackwell, vol. 51(1), pages 13-32, January.
- David Dequech, 2000. "Fundamental Uncertainty and Ambiguity," Eastern Economic Journal, Eastern Economic Association, vol. 26(1), pages 41-60, Winter.
- Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-15, March.
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