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Loanable Funds, Saving & Investment,And Financial Assets

  • William Barnett II

    ()

    (S. J. College of Business Loyola University New Orleans)

  • Walter Block

    ()

    (S. J. College of Business Loyola University New Orleans)

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    We claim that macroeconomic modeling in terms of financial assets is superior to the more traditional model of loanable funds. One advantage of this perspective is that it allows us to take cognizance of the fact that the world is complex: there are many more than one market involved. It also enables us to shed light on the fallacies of “netting out” consumer borrowing and lending. As well, placing “the” interest rate on the vertical axis is problematic, as there is no invariant measure of the value of an asset. We take the position that the usual analysis of a single money market is a simplistic way to analyze a complicated situation. We argue that a focus on the market for loanable funds leads directly to the erroneous Keynesian money model.

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    File URL: http://www.rebe.rau.ro/RePEc/rau/journl/WI11/REBE-WI11-A4.pdf
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    Article provided by Romanian-American University in its journal Romanian Economic and Business Review.

    Volume (Year): 6 (2011)
    Issue (Month): 4 (december)
    Pages: 37-54

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    Handle: RePEc:rau:journl:v:6:y:2011:i:4:p:37-54
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    1. Harcourt,G. C., 1972. "Some Cambridge Controversies in the Theory of Capital," Cambridge Books, Cambridge University Press, number 9780521096720, May.
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