Bill Dunn
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Profit and interest
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This chapter turns to questions of profit, interest and interest rates. The first section focuses on why the classics and Marx see profits in the wider economy as providing the basis for any adequate theory of interest. The financial sector can ultimately only appropriate a share of value created elsewhere. It is, however, necessary to go beyond this simple fact, and a critical engagement with Keynes can add valuable nuance. The second section therefore revisits Keynes’s critique of orthodoxy and his alternative depiction of interest rate determination through the interaction of liquidity preference and the money supply. It will be argued that starting within, and directing his critique towards, the will-o’-the-wisp that is conventional theory provides an insufficient basis for an effective alternative. Keynes can demonstrate the fallacies of his opponents’ priorities but cannot secure his own. The classics’ view can provide an anchor while at the same time, Keynes’s insights should provoke a constructive reform of the classics, as analysis moves from an abstract generality to concrete investigations of profit and interest and their relation. The third section argues that Keynes’s insights into liquidity preference and state power can be better reinterpreted as second-order effects, grounded in a classical/Marxist view of profits as the basis of interest but acknowledging questions of institutional power within finance, in the state and inter-state relations, from which both Marx and Keynes abstract. So reinterpreted, Keynes’s insight allows progress beyond the classics’ generalisations particularly in terms of understanding interest rate variability.

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