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Under-investment and the Demand for Liquid Assets

In: Value and Capital: Fifty Years Later

Author

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  • Douglas Gale

    (University of Pittsburg)

Abstract

On re-reading Hicks’s Value and Capital one is struck by the fresh ness of the ideas. The book, which somehow manages to be both magisterial and unpretentious, is surprisingly contemporary in its general outlook. The problems it poses have by no means been ‘cleared up’ by subsequent generations. In this chapter I want to reconsider what Hicks had to say about interest rates and liquidity preference. In more modern terminology, the subject is asset-pricing and the demand for liquid assets. What follows is neither an exegesis of Value and Capital nor an attempt to develop a new theory. It is simply a re-examination of some old questions from the point of view of the modern theory of asset-pricing, as developed by Lucas (1978) and others.

Suggested Citation

  • Douglas Gale, 1991. "Under-investment and the Demand for Liquid Assets," International Economic Association Series, in: Lionel W. McKenzie & Stefano Zamagni (ed.), Value and Capital: Fifty Years Later, chapter 6, pages 151-170, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-11029-2_10
    DOI: 10.1007/978-1-349-11029-2_10
    as

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