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Keynes's Finance Motive: a re-assessment. Credit, liquidity preference and the rate of interest

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  • Louis-Philippe Rochon

Abstract

This paper attempts to reconcile Keynes's post-General Theory writings on the finance motive with the horizontalist approach, as advocated by Moore, Lavoie, Kaldor and many proponents of the Franco-Italian Circuit school. It is argued here that, as Keynes felt himself lsquo;gradually getting into an outside positionrsquo; with respect to the General Theory—which he saw as a transition away from classical theory—he came to adopt many aspects of the horizontalist position as well as that of the circuit approach, including the exogeneity of the rate of interest and the view that rates do not necessarily increase during economic expansions. Keynes's post-General Theory writings therefore reject the theory of liquidity preference of the General Theory. It is suggested that, in their attempt to construct an alternative to orthodox monetary thought, post-Keynesians should abandon the confines of the General Theory, and focus instead on the views Keynes developed after the General Theory.

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  • Louis-Philippe Rochon, 1997. "Keynes's Finance Motive: a re-assessment. Credit, liquidity preference and the rate of interest," Review of Political Economy, Taylor & Francis Journals, vol. 9(3), pages 277-293.
    • Handle: RePEc:taf:revpoe:v:9:y:1997:i:3:p:277-293
    DOI: 10.1080/751245296
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    References listed on IDEAS

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    1. Paul Davidson, 1965. "Keynes'S Finance Motive," Oxford Economic Papers, Oxford University Press, vol. 17(1), pages 47-65.
    2. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-115, March.
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    Cited by:

    1. Miglierina Enrico & Molho Elena, 2002. "Well-posedness and convexity in vector optimization," Economics and Quantitative Methods qf0221, Department of Economics, University of Insubria.
    2. Claudio Sardoni, 2017. "Circuitist and Keynesian Approaches to Money: A Reconciliation?," Metroeconomica, Wiley Blackwell, vol. 68(2), pages 205-227, May.
    3. Bertocco Giancarlo, 2003. "The economics of financing firms: the role of banks," Economics and Quantitative Methods qf0312, Department of Economics, University of Insubria.
    4. Louis-Philippe Rochon, 2001. "Cambridge's Contribution to Endogenous Money: Robinson and Kahn on credit and money," Review of Political Economy, Taylor & Francis Journals, vol. 13(3), pages 287-307.
    5. Matias Vernengo & Louis-Philippe Rochon, 2001. "Kaldor and Robinson on money and growth," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 8(1), pages 75-103.
    6. Louis-Phillippe Rochon, 2012. "Money’s Endogeneity, Keynes’s General Theory and Beyond," Chapters, in: Thomas Cate (ed.), Keynes’s General Theory, chapter 13, Edward Elgar Publishing.
    7. Giancarlo Bertocco, 2007. "The characteristics of a monetary economy: a Keynes--Schumpeter approach," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 31(1), pages 101-122, January.
    8. Missaglia, Marco & Botta, Alberto, 2022. "Households’ liquidity preference, banks’ capitalization and the macroeconomy: a theoretical investigation," Greenwich Papers in Political Economy 36807, University of Greenwich, Greenwich Political Economy Research Centre.
    9. Peter Docherty, 2012. "Keynes’s General Theory, the Quantity Theory of Money and Monetary Policy," Chapters, in: Thomas Cate (ed.), Keynes’s General Theory, chapter 6, Edward Elgar Publishing.

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