Abstract
In The General Theory, Keynes distinguishes between three motives for holding cash ‘(i) the transactions-motive, i.e. the need of cash for the current transaction of personal and business exchanges; (ii) the precautionary-motive, i.e. the desire for security as to the future cash equivalent of a certain proportion of total resources; and (iii) the speculative-motive, i.e. the object of securing profit from knowing better than the market what the future will bring forth’ (Keynes, 1936, p. 170). Keynes recognized that ‘money held for each of these three purposes forms, nevertheless, a single pool, which the holder is under no necessity to segregate into three watertight compartments’ (ibid., p. 195); however, he did suggest that these three categories formed an exhaustive set and that all other reasons for holding money (e.g. the income motive or the business motive) are merely subcategories of these three major divisions (ibid., pp. 194–200). According to Keynes, the quantity of money demanded for transactions and precautionary purposes ‘is not very sensitive to changes in the rate of interest’ (ibid., p. 171); rather it ‘is mainly a resultant of the general activity of the economic system and of the level of money-income’ (ibid., p. 196); the quantity of money demanded for speculative purposes, on the other hand, responds to ‘changes in the rate of interest as given by changes in the prices of bonds and debts of various maturities’ (ibid., p. 197).
Oxford Economic Papers (17 March 1965).
The author is grateful to C.F. Carter, Miles Fleming, Sir Roy F. Harrod, Helen Raffel, Eugene Smolensky, Sidney Weintraub, and Charles R. Whittlesey for helpful comments at various stages.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Davidson, P. and Smolensky, E. (1964) Aggregate Supply and Demand Analysis, New York.
Fleming, M. (1964) ‘The Timing of Payments and the Demand for Money’, Economica, 31 May, pp. 132–57.
Friedman, M. (1959) ‘The Demand for Money: Some Theoretical and Empirical Results’, Journal of Political Economy, 67 (August), pp. 327–51.
Gurley, J. G. and Shaw, E. S. (1960) Money in a Theory of Finance, Washington.
Hahn, F. H. (1955) ‘The Rate of Interest and General Equilibrium Analysis’, Economic Journal, 65 (March), pp. 52–66.
Hansen, A. (1949) Monetary Theory and Fiscal Policy, New York.
Hicks, J. R. (1937) ‘Mr Keynes and the “classics”: A Suggested Interpretation’, Econometrica, 5 (April), pp. 147–59.
Hicks, J. R. (1957) ‘A Rehabilitation of “Classical” Economics?’, Economic Journal, 67 (June) pp. 278–89.
Keynes, J. M. (1936) The General Theory of Employment, Interest, and Money, New York.
Keynes, J. M. (1937a) ‘Alternative Theories of the Rate of Interest’, Economic Journal, 47 (June), pp. 241–52.
Keynes, J. M. (1937b) ‘The Ex-ante Theory of the Rate of Interest’, Economic Journal, 47 (December), pp. 663–9.
Modigliani, F. (1944) ‘Liquidity Preference and the Theory of Interest and Money’, Econometrica, 12 (1944), pp. 45–88; reprinted in Readings in Monetary Theory, New York, 1951, pp. 186–239.
Modigliani, F. (1963) ‘The Monetary Mechanism and Its Interaction with Real Phenomena’, Review of Economics and Statistics, 45, (February, suppl.) pp. 79–107.
Ohlin, B. (1937) ‘Some Notes on the Stockhom Theory of Savings and Investments II’, Economic Journal, 47 (June) pp. 221–40.
Patinkin, D. (1956) Money, Interest, and Prices, Evanston.
Robertson, D. H. (1938) ‘Mr Keynes and “Finance”’, Economic Journal, 48 (June) pp. 314–18.
Robertson, D. H. (1948) Essays on Monetary Theory, London.
Robinson, J. (1952) The Rate of Interest and Other Essays, London.
Tsiang, S. C. (1956) ‘Liquidity Preference and Loanable Funds Theories, Multiplier and Velocity Analyses: A Synthesis’, American Economic Review, 46 (September), pp. 540–64.
Weintraub, S. (1958) An Approach to the Theory of Income Distribution, Philadelphia.
Weintraub, S. (1960) ‘The Keynesian Theory of Inflation: The Two Faces of Janus?’, International Economic Review, 1 (May), pp. 143–55.
Weintraub, S. (1961) Classical Keynesianism, Monetary Theory, and the Price Level, Philadelphia.
Editor information
Copyright information
© 1990 Paul Davidson
About this chapter
Cite this chapter
Davidson, L. (1990). Keynes’s Finance Motive. In: Davidson, L. (eds) Money and Employment. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-11513-6_2
Download citation
DOI: https://doi.org/10.1007/978-1-349-11513-6_2
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-11515-0
Online ISBN: 978-1-349-11513-6
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)