The finance motive, the Keynesian theory of the rate of interest and the investment multiplier

Abstract

Reconstructing the whole debate on the finance motive, this work highlights the importance of Robertson's and Shaw's critical comments on the Keynesian theory of the rate of interest. Saving and liquidity cannot be conceived — as Keynes and the post-Keynesians claim — as separate categories, in that they are functionally related. This doesn't necessarily means that one has to abandon a monetary theory of the rate of interest which is based on the liquidity preferences of banks and wealth-holders (Kaldor, Shackle). Moreover, we point out a difficulty for the functioning of the multiplier that arises when — according to Keynes — the liquidity position of the revolving fund of finance is restored at the end of the circulation period.