Investment function in Marshall, Fisher and Keynes: a critique of the neoclassical theory of investment in light of the capital theory controversy

Vedit İnal

The European Journal of the History of Economic Thought, 2024, vol. 31, issue 3, 437-467

Abstract: An overwhelming majority of the economics profession is taught that there is an inverse relationship between interest rate and investment expenditures. In the light of the controversies in the theory of capital, we analyse in this article the way in which Marshall, Fisher and Keynes have constructed this inverse relationship. All three were aware of the problems associated with this construction and tried—albeit unsuccessfully—different ways to get around them. This implies that within the neoclassical analysis there does not exist a theoretically consistent conceptualisation of an investment demand function inversely responsive to the rate of interest.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:taf:eujhet:v:31:y:2024:i:3:p:437-467

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DOI: 10.1080/09672567.2024.2329052

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