To Douggy (doing my Don Adolfo imitation!):
Well, if you keep insisting that the essence of
JMK's GT is the determination of real capital investment
by what goes on in the stock market, I would say that you
are stretching things a bit. Having checked it over again
(got my GT out of the shop just in time!), I can only find
one place, p. 151 in Chapter 12 where he comes close to such
a claim, the strongest such assertion being, "But the daily
revalutations of the Stock Exchange, though they are primarily
made to facilitate transfers of old investments between one
individual and another, inevitably exert a decisive influence
on the rate of current investment." But then even this apparent
decisiveness is watered down later on the page when he claims
that it is only "certain classes of investments [unspecified]
are governed by the average expectation of those who deal on
the Stock Exchange as revealed in the price of shares..."
He actually makes little reference to the investment being
financed by the stock market, although he does allow for that
possibility. As has been noted by most of your respondents on
this matter, it is the long-run expectation itself which is
important as it affects the position of the marginal efficiency
of investment schedule, not the precise method of financing which
he allows as possibly coming from several sources. Indeed the
irrelevance of monetary policy and of interest rates is precisely
because the fluctuations of long-run expectations far exceed
the fluctuations of interest rates. Thus (GT, p. 164), "...it
seems likely that the fluctuations in the market estimation of
the marginal efficiency of different types of capital...will be too
great to be offset by any practibale changes in the rate of interest."
BTW, if I were to become infused with the spirit of Don Adolfo,
I would immediately declare victory in the sectsual wars and call
everyone on the list not agreeing with me utterly a "new fascist."
Wow! :-)
Barkley Rosser
