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In Keynesianism, interest is defined as the cost of products bought from other entrepreneurs to produce the goods minus the user cost function. Aggregate interest would be defined as the aggregate cost of goods exchanged for the production of other goods minus the user costs for N where N is the number of participants in the market.
Irving Fisher however defines interest by primarily psychological properties, and comparatively much more than Keynes, by saying interest is defined through the invisible hand's magic and constant fluctuation because of deviant individual's willingness to lend or time preference for income and the relative slopes of these aggregate psychological properties determines interest.
Ludwig Von Moses defines interest as the meeting point of the different participants in the market's marginal use-value of the individual unit of money in question, but then says the level of interest starts with the financial institutions who set it and through their policies can actually keep the interest above or below the natural rate indefinitely.
Who is right here? They all seem to make valid points.
Econ general, what are you reading.
For me it's The General Theory... by Keynes
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>>2167893
>Irving Fisher however defines interest by primarily psychological properties, and comparatively much more than Keynes, by saying interest is defined through the invisible hand's magic and constant fluctuation because of deviant individual's willingness to lend or time preference for income and the relative slopes of these aggregate psychological properties determines interest.
Why does every hack who uses the 'Invisible Hand' argument only ever use it incorrectly? Have any of them actually read Adam Smith?
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>>2167953
I use it in the context of a free market state of interest correction, which Keynes would agree with as regards the interest rate, due to the principle of market clearing.
Anyway, it just means the savings rate and the investment rate needs to be equal to the slopes of the willingness of the borrowers to borrow and the lenders to lend and on the other hand the aggregate slopes of the time preferences of borrowers AND lenders for income this year and subsequent years.
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>Just before his death in 1946, Keynes told Henry Clay, a professor of social economics and advisor to the Bank of England[67] of his hopes that Adam Smith's 'invisible hand' can help Britain out of the economic hole it is in: "I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago."[68]
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>>2167982
In his General Theory book, Keynes has a problem with full employment under the graphs of the aggregate supply curve and the aggregate demand curve. The savings and interest rates, however strictly defined, DO have a natural equilibrium rate where they meet and rest at all times under Keynesianism, unlike the aggregate supply and aggregate demand curves.
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>>2168001
>interest
This should be 'investment'. My b
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>>2167982
google "recanted before his death"
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By the way has anyone here read The General Theory of Employment Interest and Money?
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>>2167893
>Who is right here? They all seem to make valid points.
None of them, until it can proven with experimentation which one is correct. Which in economics is mostly impossible.
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