Economy and Interest
A New Presentation of the Fundamental Problems Related to the Economic Role of the Rate of Interest and Their Solutions
Economy and Interest
A New Presentation of the Fundamental Problems Related to the Economic Role of the Rate of Interest and Their Solutions
The essential work from the Nobel Prize-winning virtuoso of twentieth-century economics, translated to English for the first time.
Few scholars advanced the frontier of economic modeling more than French economist Maurice Allais. Allais’s contributions—beyond his famous Allais’s Paradox—earned him the Nobel Prize and drew comparisons to the works of Paul Samuelson and even some modern mathematical behavioral economists.
Allais’s accomplishments, however, went largely unread by non-Francophone readers due to the challenge of their translation for publishers. The effects of this gap are immeasurable. As Paul Samuelson wrote, “Had Allais's earliest writings been in English, a whole generation of economic theory would have taken a different course.”
Economy and Interest is the milestone translation of Allais's most influential work, one whose staggering findings predate their accepted formulations by other famed economists decades later. In its sweep and technical virtuosity, Economy and Interest is certain to delight and challenge new generations of English-language readers.
632 pages | 114 line drawings, 25 tables | 6 x 9 | © 2024
Economics and Business: Economics--General Theory and Principles
Table of Contents
A Note on the Translation
To the Reader
Chapter 1. Introduction
2. Aim of the present study (2)
3. The plan followed (3)
Chapter 2. Overview
2. Definition of interest (5)
3. The case of conventional monetary economies (6)
4. The rate of interest as price of use and as exchange premium (7)
5. Quadruple aspect of the rate of interest in conventional monetary economies (8)
6. Capital-based monetary theories of interest (9)
7. Diversity of interest rates (10)
8. Pure interest (11)
9. The assumption of perfect foresight (12)
10. Stationary models (13)
11. Representation of the rate of interest (14)
12. Continuous capitalization and discounting (15)
13. Discontinuous capitalization and discounting (16)
14. Equivalent rates (17)
15. The Fable of the Golden Shilling (18)
16. Monetary interest rates, wage interest rates, real interest rates, gold interest rates, true interest rates (19)
17. The production process (20)
Chapter 3. The Fable of the Fishermen
2. Possibility of a positive or negative real interest rate in the absence of any indirect process of production (22)
3. Effects of technical progress (23)
4. Possibility of positive real interest under stationary conditions in the case of an indirect production process (24)
5. Possibility of a real negative rate under stationary conditions in the case of an indirect production process (25)
6. Role of the rate of interest in production (26)
7. Characteristic diagram of production (27)
Chapter 4. Interest, Capital, and Capitalization
2. Price of durable goods (29)
3. Price of perpetual annuities (30)
4. Capital and income (31)
5. Determination of the value of goods (32)
6. Analysis of the price of use (33)
7. Basic components of prices (34)
8. Basic price components in equilibrium (35)
9. Nature of capital (36)
10. Aggregation of capital and income (37)
Chapter 5. Determination of the Equilibrium Rate of Interest on Capital in an Account-Based Economy
2. Motives for saving (40)
3. The saver’s rent (41)
2. Indirect processes of production and waiting (43)
3. Technical interest rate (44)
4. Demand for capital (45)
5. Importance of forecasts in determining investments (46)
6. Rate of interest, production period, and distribution of the primary factors of production (47)
2. Determination of the rate of interest in equilibrium dynamics (49)
3. Accumulation of capital and the role of the banks (50)
4. Role of savings (51)
5. Technical progress and interest (52)
6. Accumulations of capital and transitions (53)
Chapter 6. Interest and Social Efficiency
2. Theorem of social efficiency (55)
3. Social efficiency and the distribution of consumer goods and services (56)
4. Maximization of social efficiency, distribution of incomes over time, and organization of the system of production (57)
5. Conditions determining the proof of the theorem of social efficiency (58)
6. Infinite-horizon model (59)
7. Broadening the concept of social efficiency (60)
8. Generalized theorem of social efficiency (61)
9. Interest, social efficiency, and production (62)
10. Interest, social efficiency, and consumption (63)
11. Interest, social efficiency, propensity to own, and propensity to bequeath (64)
12. Interest, social efficiency, and State intervention (65)
13. Interest, social efficiency, and classical theory (66)
Chapter 7. Interest and Social Productivity
2. Physical productivity of indirect processes of production (68)
3. Conditions for maximization of physical productivity of indirect processes of production (69)
4. Variation of the physical productivity of production processes with their capital intensity and the rate of interest (70)
5. Significance of the results obtained (71)
6. Social productivity and distribution (72)
7. Social productivity and social efficiency (73)
8. Transition from one stationary state to another (74)
9. Interest, social productivity, and propensity to own and to bequeath (75)
10. Social productivity and classical theory (76)
11. Social efficiency, social productivity, and interest rate policy (77)
Chapter 8. Interest and Money
2. Speculative reserve (80)
3. Interest as price paid for use of money (81)
4. Liquidity preference and money balances (82)
2. Consumers’ decisions (85)
3. Decisions of firms (86)
4. Financial market (87)
5. Money market (88)
6. Arbitraging between financial investments (89)
7. Money market and financial market (90)
2. Lending banks: their income and policy (92)
3. Central Bank discount rate (93)
4. Pure interest rate, discount rate, liquidity premiums, and volume of money balances (94)
5. Credit and financing (95)
2. Determination of the rate of interest in the dynamic disequilibrium of an economy having no unbacked demand deposits, no hoarding, and using inconvertible cash (98)
2. Determination of the rate of interest in a dynamic disequilibrium process (100)
3. Classical point of view and modern theory (101)
2. Interest, money, and quantity theory (103)
3. Money, credit, and social efficiency (104)
4. Specific characteristics of money as an economic good (105)
5. Inflation, deflation, and the rate of interest (106)
6. Inflation, deflation, and competition (107)
7. Discount rate policy (108)
8. Bank inflation and forced savings (109)
9. Exchange rates and discount rates (110)
10. Interest rate disparities (111)
11. Basic factors of economic instability (112)
12. Principles of an economic regulatory policy in relation to the phenomenon of interest (113)
Chapter 9. The Problem of Interest
2. Analysis of the problem (115)
3. The problem of interest from the ethical and economic viewpoints (116)
2. Progress-based theories (119)
3. Exploitation theories (120)
4. Spontaneous productivity of nature theory (121a)
5. Capital demand theory (121b)
6. Capital supply theory (121c)
2. Time theory (123)
2. Relative wage and interest level theory (125)
3. Quantitative theory of interest (126)
2. Abstinence theories (128)
3. Perfected capital-based theory of interest (129)
4. Agio theory (130)
5. Fructification theory (131)
6. Theory of the availability of money (132)
7. Annuity theory (133)
2. Rate of interest and private ownership of land (135)
3. Rates of interest, storage, and hoarding (136)
4. Why there is an invariably positive interest rate (137)
5. Effects of indefinite accumulation of capital (138)
6. Rates of interest and State intervention (139)
Chapter 10. Significance of the General Theory of Interest
2. Capitalistic and monetary aspects of the phenomenon of interest (141)
3. Ubiquity of the interest rate (142)
4. Need for mathematical logic and of abstraction (143)
2. Interest, social efficiency, and consumption (145)
2. Social productivity and classical theory (147)
2. Rates of interest and economic cycles (149)
3. Money and social efficiency (150)
2. The collectivist economy and the rate of interest (153)
2. Collectivist economy and positive rates of interest (155)
3. Legal limitations of the rate of interest (156)
4. Present justification of interest (157)
2. Selection of a stable unit of account (160)
3. Monetary depreciation (161)
4. 100% backing of demand deposits (162)
5. Collectivization of land ownership (163)
6. Realization of a zero rate of interest (164)
2. Advantages of the proposed policy in terms of the organization of production (166)
3. Advantages of the proposed policy with regard to economic cycles (167)
4. Advantages of the proposed policy with regard to distribution (168)
At the End of a Study (170)
The Appendixes. Illustration of the General Theory of Interest by the Study of Simplified Models
Appendix I. Illustration of the Theory of Social Productivity
2. Condition of maximization of social productivity (173)
3. Application to a specific case (174)
Appendix II. Illustration of General Economic Interdependences
2. The circuit of values (178)
3. Conditions of validity of solutions (179)
4. The case of collective land ownership (180)
5. Private and collective land ownership (181)
6. Noteworthy levels of interest rate I (182)
7. Conditions of equilibrium in the case in which no roundabout processes are used (183)
8. Specific study of the variations in the noteworthy values of the rate of interest and of the no-land case (184)
9. General discussion (185)
10. The case of use of a double rate of interest (186)
2. Interpretation of the conditions (188)
3. Conditions of equilibrium in the case of use of the indirect process (189)
4. Conditions of equilibrium in the case of use of direct process (190)
5. Noteworthy values of the rate of interest (191)
6. Discussion (192)
7. Interpretation of the solutions (193)
8. The case of a double rate of interest (194)
2. General conditions of equilibrium (196)
3. Social efficiency, social productivity, and satisfactions (197)
4. The rationale of interest (198)
5. State intervention (199)
2. The conditions of competitive equilibrium (201)
3. The circuit of values (202)
4. Conditions of validity of the solutions (203)
5. General discussion (204)
6. Study of a specific case (205)
7. The price level (206)
8. Social efficiency (207)
9. Economic interpretation of the results obtained (208)
2. Economic interpretation of the results obtained (210)
2. Conditions of the equilibrium (212)
3. The case of rediscount by a central bank (213)
4. Economic interpretation of the results obtained (214)
2. Conditions of competitive equilibrium (216)
3. The case of a double interest rate (217)
Appendix III. Illustration of the Generalized Theory of Social Efficiency
2. The economy studied (219)
3. Conditions of competitive equilibrium (220)
4. Demonstration of generalized social efficiency (221)
Index
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