Abstract

Keynes as a Capital Theorist

As a critical evaluation of the Keynesian fundamentalism – whose protagonists understand themselves as post-Keynesians – this essay discusses the demands to be met by a Keynesian-type economy formulating a monetary production theory. The principle underlying such Keynesian-type economy – by which it distinguishes itself from the classical and neoclassical theory of value – is that money forms the market system’s restriction on budgets – the unity of wealth, commodity and labour markets -- and that, as a consequence, money interest becomes the market system’s general scarcity-induced price. This means that the interest rate is explained in terms of liquidity preference; it functions as the price of giving up liquidity, but not – as distinct from the orthodox line of thinking – the price of non-consumption. In this context, the monetary character of production presupposes that capital, too, represents a form of giving up liquidity with the rate of return being a kind of money interest. However, the Keynesian fundamentalism closes its eyes on this insight by deriving the rate of return from the nature of capital as a means of production and interpreting it as a quasi-rent. By doing so, this fundamentalism just covers the effects of the liquidity preference which makes the interest rate a barrier standing in the way toward full employment, while ignoring that the liquidity preference keeps capital scarce thus enabling a profit to be made. A monetary theory of production that is conclusive in itself thus shows that the limitation of production and the generation of profits are just the two sides of one medal. Contrary to the views of the Keynesian fundamentalism, the liquidity preference does, however, not cause any market failure preventing full employment which may be counteracted by a policy of low interest. It rather reflects the principle at the base of a money economy presupposing excess supply and involving a trend toward underemployment as a consequence