Prosperity and Depression.pdf

Chap. 8Recent Discussions on the Trade Cycletotal sales of that commodity, the motives of purchasers differfrom those ofsellers. In the same way, the motives for investmentdiffer from those for saving; and the word U investment" may beused for the value of unconsumed income when the context refersto the motives of investors, while the word " savings " may beused for the same quantity when it is desired to emohasise themotives of savers.!§ 3. HOARDING, LIQUIDITY PREFERENCE AND rHE RATEOF INTERESTThe theory of interest has for a long time been a weak spot inthe science of economics, and the explanation and determinationof the interest. rate still gives rise to more disagreement amongeconomists than any other branch of general economic theory.For a long time, the theory of interest has hadThe "pure" two distinct branches or stages. There is (a) thetheory " pure" theory of interest in essentially nonofinterest. monetary terms explainfug the rate of interest asthe price of capital, determined by the marginalproductivity of capital in a technological sense and by certainpsychological factors (time-preference) influencing the relativeurgency of present and future needs; Professor MARGET! callsthese doctrines "real capital theories". (That some writers,chiefly the followers ofBohm-Bawerk, go on to interpret marginalproductivity of capital in terms of a lengthening or shorteningof the period of production, whilst other writers object to thatinterpretation, has been mentioned on an earlier occasion.) a1 Further elaborations will be found in G. Haberler: H National Income,Savings and Investment ", in Studies in Income and Wealth. Vol. II,published by the National Bureau of Economic Research. New York,1938•• In a series of (unpublished) lectures delivered at the London Schoolof Economics, 1933, and in an unpublished paper submitted to the Ame..rican Economic Association at its meeting in Atlantic City, December1937. The history of the two groups of theories and of the attemptsat bridging the gap between them will be traced in Professor Marget'sforthcoming Vol. II of his Theory 01 Prices.• See footnote 1 on page 40 above.