Stock Equilibrium in Asset Markets and “The Folly of Amateur Speculators”: The Marshallian Setting

Abstract

In seeking a source for Keynes’s theoretical views one is on firm ground in starting from the source of economics as he knew it, Alfred Marshall. In the last chapter we saw how the problems of later Marshallianism coalesced around the dynamics of investment in industries dominated by increasing returns, joint-stock ownership and large units of production. Some monetary and financial topics logically arise from this change in the Marshallian landscape. They include the investigation of methods of trading on organized produce and stock exchanges such as such large dealings in production and capital call forth, the industrial needs these institutions fulfill and the wider social implications of the speculation possibilities such trading may introduce. It also calls for analysis of the activity of “holding” the financial assets traded on such exchanges, especially the now tradable capital assets. As we will see, it was no coincidence that these became exactly the themes of Keynes’s own financial market work.