A Modern Interpretation of Keynes' Analysis of Speculation in the Professional Financial Markets and the Impact on the Allocation of Talent

Kurt von Seekamm ()
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Kurt von Seekamm: Salem State University

Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science, 2017, vol. 51, issue 1, 223-246

Abstract: This paper explores the role of secondary financial markets and the proliferation of speculation. In 'The General Theory', Keynes identifies speculation as a social bad that can increase volatility. This paper extends Keynes’ analysis to comment on two additional possible consequences of increased speculation. The first consequence is a redistribution of income. This change in the income distribution is shown to have long run employment effects in a Post-Keynesian model. The second consequence is a possible externality caused by increased speculation, a misallocation of human capital. Using the Integrated Postsecondary Education Data System’s Survey of Institutional Characteristics and Survey of Degree completions, some suggestive empirical evidence is presented. The primary finding is that US states that have a high proportion of college graduates with finance related degrees grew more slowly on average between 1990 and 2012.

Keywords: Keynes; Speculation; Rent seeking; Human capital; Financial markets (search for similar items in EconPapers)
JEL-codes: D84 E02 E12 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:fle:journl:v:51:y:2017:i:1:p:223-246

DOI: 10.26331/1011

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