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Financing Investment under Fundamental Uncertainty and Instability: A Heterodox Microeconomic View

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  • Tae-Hee Jo

    (Economics and Finance Department, The State University of New York – Buffalo State, USA)

Abstract

This study inquires into investment and finance decisions as they are related to other decisions within the going business enterprise embedded in the monetary social provisioning process. When it comes to investment and finance, business enterprises’ strategic decisions often escape notice by heterodox macroeconomists. In place of strategic decisions, financing and investment are mainly looked at through the operation of the financial market in which the supply of and demand for investment funds are coordinated by the prices of funds. Consequently, heterodox macroeconomic theory of investment and finance deals mainly with external financing. In this article I argue that that the strategically generated internal means of finance is the main source of fixed investment, especially when the economy is in recession or economic instability is increasing. The positive empirical relationship between external finance and fixed investment is hardly discerned. Even the financialization of non-financial corporations in recent decades has not reduced the importance of internal financing over external financing.

Suggested Citation

  • Tae-Hee Jo, 2015. "Financing Investment under Fundamental Uncertainty and Instability: A Heterodox Microeconomic View," Bulletin of Political Economy, Bulletin of Political Economy, vol. 9(1), pages 33-54, June.
    • Handle: RePEc:awu:journl:v:9:y:2015:i:1:p:33-54
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    Cited by:

    1. Tae-Hee Jo, 2019. "The Institutionalist Theory of the Business Enterprise: Past, Present, and Future," Journal of Economic Issues, Taylor & Francis Journals, vol. 53(3), pages 597-611, July.
    2. Jo, Tae-Hee, 2016. "A Heterodox Theory of the Business Enterprise," MPRA Paper 72426, University Library of Munich, Germany.
    3. Jo, Tae-Hee, 2013. "Uncertainty, Instability, and the Control of Markets," MPRA Paper 47936, University Library of Munich, Germany.
    4. Tae-Hee Jo, 2016. "What If There Are No Conventional Price Mechanisms?," Journal of Economic Issues, Taylor & Francis Journals, vol. 50(2), pages 327-344, April.

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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