The Keynes-Harrod Controversy on the Classical Theory of the Rate of Interest and the Interdependence of Market
de Boyer des Roches, Jérôme (2010), The Keynes-Harrod Controversy on the Classical Theory of the Rate of Interest and the Interdependence of Market, Journal of the History of Economic Thought, 32, 2, p. 263-284. http://dx.doi.org/10.1017/S1053837210000180
TypeArticle accepté pour publication ou publié
Journal nameJournal of the History of Economic Thought
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Author(s)de Boyer des Roches, Jérôme
Abstract (EN)The aggregation of budget constraints of the enterprises and the households allows us to throw a new light on the controversy between Keynes and Harrod concerning the classical theory of the rate of interest. It appears that the critique of the classical theory that Keynes formulated does not presuppose the liquidity preference theory; it is based on the multiplier theory. We show that this critique is logically founded and that it is based upon the absence of the labour market in the analysis of the interdependence between the markets for financial assets and for goods. Harrod did not comprehend it completely. This explains one lacuna in the model of the General Theory that Harrod (1937) proposed. We show that it lacks an equation and that the equilibrium (hence the rate of interest) is indeterminate, which is not the case in the article by Hicks (1937). We conclude that if there is relevance in Keynes’s criticism of the classical theory, then similar a criticism can be directed at Keynes’s own theory.
Subjects / KeywordsKeynes; Harrod; Multiplier; Interdépendance des marchés; Interest rate; Walras law; Taux d'intérêt
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