Prosperity and Depression.pdf

%00 AnalYsis of Theories Part IWe are not here concerned with the concept ofCriticism of the" natural " or " equilibrium " rate ofinterest (asthe Hlonetary discussed in Chapter 3), but with the underlyingtheory explanation of the market rate by means of demandof interest. and supply curves of credit, as developed inChapter·3, and more fully in § 2 of this chapter inelaboration of Professor OHLIN'S theory. We recall that demandfor and supply of credit is !not the san1e thing as demand for andsupply of (ex aIIte) saving, but that the curves relating to thelatter form a part of the curves relating to credit~Objections are raised against that theory on the ground of itsimplying (a) that" saving is not necessarily equal to investment",(b) that "the amount of money hoarded is not necessarily equal tothe increase in the amount of money ". 1The first of these two difficulties has already been discussed in§ 2 of this chapter; it would appear to arise from the variouspossible meanings which may be attached to the terms "saving "and "investment". If these terms are defined in the mannerproposed by Professor ROBERTSON, the difficulty would seem todisappear, and Profesor OHLIN'S analysis, if carried to its· logicalconclusion, gives the same result.The second difficulty, concerning the termThe concept "hoarding", requires careful consideration, becauseof it has been an important source of confusion andcc hoarding". misunderstanding in recent years.The term" hoarding" is alien to Mr~ KEYNES'terminological system. It is used only when reference is made totheories of other writers. In such cases, however, it would seemthat the term is used in two distinct senses, and the sense which,in most cases, is applied and attributed t9 other writers would seemto differ from the meaning attributed to it explicitly or implicitlyby those·writers themselves.According to this definition, " net new hoarding" (in the senseof the amount hoarded; that is, of the result of this activity," hoarding", during a certain period) is the same thing as the1 A. P. Lerner: " Alternative Formulations of the Theory of Interest ".in the Economic Journal, Vol. 48, June 1938, page 215