Money, Capital Turnover, and the Leisure Class: Thorstein Veblen’s Tips for a Monetary Theory of Production

Abstract

Many contemporary scholars maintain that significant similarities can be traced between Veblen’s theoretical framework and Keynes’s approach, with particular reference to the so-called monetary theory of production (hereafter MTP). In particular, Vining (1939) argues that Veblen should be counted as one of the authors who ‘anticipated’ Keynes’s theory of effective demand, and his monetary conception of the interest rate. Vianello (1961, p. 252) stresses the shared conviction — on the part of both Veblen and Keynes — that the interest rate is not determined by the supply-demand mechanism, and that its variations play a crucial role in determining economic crises. Dillard (1987) emphasizes that Veblen’s dichotomy between industrial and pecuniary employment is a key issue of the MTP and that relevant analogies between Veblen’s and Keynes’s views of the functioning of monetary economies are to be considered:

Money is a form of private property that wealth holders in business enterprise economy at times treasure more than income itself. It is a device for limiting losses in a profit-and-loss economy. The moral of Veblen’s teaching is that in a pecuniary economy, monetary values dominate industrial values. (Dillard, 1987, p. 1646)