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The Rate of Interest

In: The General Theory of Profit Equilibrium

Author

Listed:
  • Connell Fanning

    (National University of Ireland)

  • David O Mahony

    (University College)

Abstract

The traditional theory of interest, as Keynes understood it (CW, VII: Chapter 14, with Appendix; also CW, XIV: 101–4), was an essential part of a body of economic theory which he regarded as dealing with the ‘real-exchange economy’ (CW, XIII: 409). The task which he sought to undertake, therefore, was to develop an explanation of the phenomenon of interest in the monetary economic system. In doing so he saw himself as filling one of the three major gaps, as he described them, in traditional economic theory (CW, VII: 31). His theory of the determination of the rate of interest and his explanation of the rôle of the rate of interest in the economic system completes his analysis of the ‘system’s determinants’ on the demand-side. The other two determinants, it will be recalled, are the propensity to consume and the schedule of the marginal efficiency of capital (CW, VII: 183–4).

Suggested Citation

  • Connell Fanning & David O Mahony, 1998. "The Rate of Interest," Palgrave Macmillan Books, in: The General Theory of Profit Equilibrium, chapter 7, pages 118-145, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-50228-4_7
    DOI: 10.1057/9780230502284_7
    as

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