Under-investment and the Demand for Liquid Assets

Douglas Gale ()

Chapter 6 in Value and Capital: Fifty Years Later, 1991, pp 151-170 from Palgrave Macmillan

Abstract: Abstract On re-reading Hicks’s Value and Capital one is struck by the fresh ness of the ideas. The book, which somehow manages to be both magisterial and unpretentious, is surprisingly contemporary in its general outlook. The problems it poses have by no means been ‘cleared up’ by subsequent generations. In this chapter I want to reconsider what Hicks had to say about interest rates and liquidity preference. In more modern terminology, the subject is asset-pricing and the demand for liquid assets. What follows is neither an exegesis of Value and Capital nor an attempt to develop a new theory. It is simply a re-examination of some old questions from the point of view of the modern theory of asset-pricing, as developed by Lucas (1978) and others.

Keywords: Interest Rate; Asset Price; Marginal Utility; Representative Agent; Incomplete Market (search for similar items in EconPapers)
Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:pal:intecp:978-1-349-11029-2_10

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DOI: 10.1007/978-1-349-11029-2_10

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