Skip to main content
SpringerLink
Log in

Loanable Funds Versus Liquidity Preference — The Hicks-Hansen Framework

  • Chapter
Robertsonian Economics

  • 17 Accesses

Abstract

Two developments evident from published articles and from correspondence particularly between Keynes and Hicks,1 indicate that Keynes moved a substantial way back to Robertsonian, and classical, interest theory after 1936, such that he no longer neglected the influence of productivity and thrift upon the interest rate. These were:

  1. i)

    Keynes’ general acceptance of the IS-LM framework put forward by J. Hicks (and later by A. Hansen),2

  2. ii)

    The introduction of the concept of ‘finance’ in discussing the financial provision for the increment in investment in the multiplier process.

In this section we concentrate upon the former by examing the consequences of the Hicks-Hansen framework upon the role of productivity and thrift in affecting output, employment and the rate of interest. The concept of finance is a subject of a later section.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
eBook
USD 16.99
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Loanable Funds Versus Liquidity Preference — The Hicks-Hansen Framework

  1. See in particular JMK, ‘Alternative theories of the rate of interest’, EJ, (June 1937) pp. 241–52 (reprinted in JMK, CW, Vol. XIV, pp. 201–15) and

    Google Scholar 

  2. JMK ‘Mr. Keynes on Finance’, EJ, (June 1938) pp. 314–322.

    Google Scholar 

  3. J. R. Hicks, ‘Mr. Keynes and the classics’, Economica, Vol. 5, (April 1937) pp. 147–55 and

    Article  Google Scholar 

  4. A. Hansen, A Guide to Keynes, Chapter 7, (New York: McGraw-Hill, 1953).

    Google Scholar 

  5. JMK, ‘Alternative theories of the rate of interest’, EJ, (June 1937). See also G. Haberler, op cit., p. 216.

    Google Scholar 

  6. DHR, UAT, p. 105, Cf. R. Harrod, Towards a Dynamic Economics, (London: Macmillan, 1948) p. 67.

    Google Scholar 

  7. DHR, ‘Industrial Fluctuation and the Natural Rate of Interest’, EJ, (December 1934) pp. 650–56. (Reprinted in DHR, EMI, pp. 64–74).

    Google Scholar 

  8. Ibid, p. 174, see also JMK, ‘Alternative theories of the rate of interest’, EJ, (June 1937) p. 250.

    Google Scholar 

  9. Taken from DHR, UAT, p. 90, but derived by DHR from an article by J. R. Hicks ‘World Recovery after War — a theoretical analysis’, EJ, (June 1947) pp. 151–164.

    Google Scholar 

  10. DHR, ‘Alternative theories of the rate of interest’, EJ, (September 1937) p. 431.

    Google Scholar 

  11. DHR, ‘Alternative theories of the rate of interest’, EJ, (September, 1937) p. 431. See also DHR, EMI, pp. 165–6.

    Google Scholar 

  12. This problem is commented upon at length in J. Tobin, ‘Liquidity Preference as Behaviour towards Risk’, Review of Economic Studies, Vol. 25, (February 1958) pp. 65–86. It prompted Tobin to develop the probability distribution approach.

    Article  Google Scholar 

  13. See DHR, UAT, pp. 78–9 also LEP, pp. 381ff. See also chapter by W. Fellner ‘Employment Theory and Business Cycles’, in A Survey of Contemporary Economics, (edited by H. Ellis), (Philadelphia: Blakiston Co., 1948).

    Google Scholar 

  14. DHR, ‘Comments upon Mr. Johnson’s Notes’, Review of Economic Studies, Vol. 19, (1950–1) p. 106.

    Google Scholar 

  15. For further details on this debate see: (i) DHR, ‘Alternative theories of the rate of interest’, EJ, Vol. 47, (1937) pp. 428–36.

    Google Scholar 

  16. (ii) JMK, ‘The “Ex Ante” Theory of the Rate of Interest’, EJ, Vol. 47, (1937) pp. 663–9.

    Google Scholar 

  17. (iii) DHR, ‘Mr. Keynes and Finance’, EJ, Vol. 48, (1938) pp. 314–8.

    Google Scholar 

  18. (iv) JMK, ‘Mr. Keynes and Finance’, EJ, Vol. 48, (1938) pp. 318–22. (v) DHR, ‘Mr. Keynes and the rate of interest’, EMI, pp. 150–187.

    Google Scholar 

  19. E. S. Shaw, ‘False Issues in the Interest-Theory Controversy’, Journal of Political Economy, Vol. 46, (1938) pp. 838–56; see also DHR, EMI, pp. 164–5.

    Article  Google Scholar 

  20. JMK, GT, pp. 171–2, pp. 200–1; also J. Robinson, An Introduction to the Theory of Employment, (London: Macmillan, 1937) pp. 76–8.

    Google Scholar 

  21. N. Kaldor, ‘Speculation and Economic Stability’, Review of Economic Studies, Vol. 7, (October 1939) pp. 1–27.

    Article  Google Scholar 

  22. See also J. R. Hicks, Value and Capital, (Clarendon Press, 1939) Ch. XI.

    Google Scholar 

  23. See A. Marshall, Principles of Economics, (Macmillan) pp. 81–2. F. Lavington, English Markets, (London: Methuen & Co., 1929) esp. Ch. VI. A. C. Pigou, op cit.

    Google Scholar 

  24. DHR also recognised the liquidity preference theory in the writings of a Spanish Economist. See DHR, ‘A Spanish Contribution to the Theory of Fluctuations’. Economica, (February 1940) pp. 50–65.

    Google Scholar 

  25. See especially DHR, ‘Industrial Fluctuation and the Natural Rate of Interest’, EJ, (December 1934) pp. 650–56. However the remedy may have been found with the aid of JMK.

    Google Scholar 

  26. (See DHR, ‘Some Notes on Mr. Keynes’ General Theory of Employment’, QJE, Nov. 1936, pp. 168–91).

    Google Scholar 

  27. Although it is possible to construct a loanable funds theory which does fit into Keynesian analysis. See J. W. Conard, The Theory of Interest, (Univ. of California Press 1963) Ch. XII.

    Google Scholar 

  28. B. Tew, ‘Interest Rates and Asset Prices’, Economica, Vol. 28, (November 1961) p. 429.

    Article  Google Scholar 

Download references

Authors
  1. John R. Presley B.A., Ph.D.
    View author publications

    You can also search for this author in PubMed Google Scholar

Copyright information

© 1978 John R. Presley

About this chapter

Cite this chapter

Presley, J.R. (1978). Loanable Funds Versus Liquidity Preference — The Hicks-Hansen Framework. In: Robertsonian Economics. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-03239-6_18

Download citation

Publish with us

Policies and ethics

Search

Navigation