The Value of Money

Abstract

The major omission from the Robertsonian analysis so far is the failure to enquire as to the determination of the price level. It has been seen that price changes are an integral part of the forced saving process — and by now there should be no necessity to elaborate the importance of this process both for the theory of industrial fluctuation, and for the Keynes/Robertson debate on the multiplier and interest theories; but the theory of how the aggregate price level is determined is not part of the latter debate. The General Theory is principally a theory of employment, not an explanation of inflation; for Robertson prices are free to vary even where unemployed resources exist. This chapter takes as its theme the Robertsonian explanation of price movements, but the objective is wider than this. In addition it will show the integration found between the theories of interest and prices, the extent to which the Robertsonian theory of prices followed in the Marshallian tradition, and the reaction of Robertson to Patinkin’s interpretation of the neo-classical theory of absolute prices.¹