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Robertson and the Liquidity Preference Theory of Interest

In: Robertsonian Economics

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  • John R. Presley

Abstract

The final stage in the saving/investment debate in the inter-war period was the introduction by Keynes of the liquidity preference theory of interest. If saving and investment were no longer to act together in the determination of the rate of interest, as in the so called ‘classical’ system, but were to marry themselves through changes in the level of income, how was Keynes to explain the determination of the rate of interest? If he supported the Robertsonian theory of interest,1 his precise theory of the multiplier would be substantially weakened by the influence of saving and investment upon the rate of interest. Of necessity he had to provide in the General Theory a new approach to interest rate determination.

Suggested Citation

  • John R. Presley, 1978. "Robertson and the Liquidity Preference Theory of Interest," Palgrave Macmillan Books, in: Robertsonian Economics, chapter 11, pages 177-185, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-03239-6_17
    DOI: 10.1007/978-1-349-03239-6_17
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