Book contents
- Frontmatter
- Contents
- General Introduction
- Editorial Introduction
- Preface
- Preface to the German Edition
- Preface to the Japanese Edition
- Preface to the French Edition
- Book I Introduction
- Book II Definitions and Ideas
- Book III The Propensity to Consume
- Book IV The Inducement to Invest
- 11 The Marginal Efficiency of Capital
- 12 The State of Long-term Expectation
- 13 The General Theory of the Rate of Interest
- 14 The Classical Theory of the Rate of Interest
- 15 The Psychological and Business Incentives to Liquidity
- 16 Sundry Observations on the Nature of Capital
- 17 The Essential Properties of Interest and Money
- 18 The General Theory of Employment Re-stated
- Book V Money-wages and Prices
- Book VI Short Notes Suggested by the General Theory
- Appendix 1 Printing Errors in the First Edition
- Appendix 2 Fluctuations in Net Investment in the United States (1936)
- Appendix 3 Relative Movements of Real Wages and Output (1939)
- Index
15 - The Psychological and Business Incentives to Liquidity
from Book IV - The Inducement to Invest
Published online by Cambridge University Press: 05 November 2012
- Frontmatter
- Contents
- General Introduction
- Editorial Introduction
- Preface
- Preface to the German Edition
- Preface to the Japanese Edition
- Preface to the French Edition
- Book I Introduction
- Book II Definitions and Ideas
- Book III The Propensity to Consume
- Book IV The Inducement to Invest
- 11 The Marginal Efficiency of Capital
- 12 The State of Long-term Expectation
- 13 The General Theory of the Rate of Interest
- 14 The Classical Theory of the Rate of Interest
- 15 The Psychological and Business Incentives to Liquidity
- 16 Sundry Observations on the Nature of Capital
- 17 The Essential Properties of Interest and Money
- 18 The General Theory of Employment Re-stated
- Book V Money-wages and Prices
- Book VI Short Notes Suggested by the General Theory
- Appendix 1 Printing Errors in the First Edition
- Appendix 2 Fluctuations in Net Investment in the United States (1936)
- Appendix 3 Relative Movements of Real Wages and Output (1939)
- Index
Summary
We must now develop in more detail the analysis of the motives to liquidity-preference which were introduced in a preliminary way in chapter 13. The subject is substantially the same as that which has been sometimes discussed under the heading of the demand for money. It is also closely connected with what is called the income-velocity of money;—for the income-velocity of money merely measures what proportion of their incomes the public chooses to hold in cash, so that an increased income-velocity of money may be a symptom of a decreased liquidity-preference. It is not the same thing, however, since it is in respect of his stock of accumulated savings, rather than of his income, that the individual can exercise his choice between liquidity and illiquidity. And, anyhow, the term ‘income-velocity of money’ carries with it the misleading suggestion of a presumption in favour of the demand for money as a whole being proportional, or having some determinate relation, to income, whereas this presumption should apply, as we shall see, only to a portion of the public's cash holdings; with the result that it overlooks the part played by the rate of interest.
In my Treatise on Money I studied the total demand for money under the headings of income-deposits, business-deposits, and savings-deposits, and I need not repeat here the analysis which I gave in chapter 3 of that book. Money held for each of the three purposes forms, nevertheless, a single pool, which the holder is under no necessity to segregate into three water-tight compartments; for they need not be sharply divided even in his own mind, and the same sum can be held primarily for one purpose and secondarily for another.
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- Information
- The Collected Writings of John Maynard Keynes , pp. 194 - 209Publisher: Royal Economic SocietyPrint publication year: 1978